Survey shows policy uncertainty has petroleum industry investors nervous about Alberta
Posted Jan 14, 2016 7:35 am.
Last Updated Jan 14, 2016 7:40 am.
This article is more than 5 years old.
As the price of oil hovers around US$31 a barrel, the Fraser Institute is out with its annual global survey of investor confidence for oil and gas development.
Relative to other parts of the world, Alberta is still seen as a favourite but the province took a big hit in 2015, dropping from 16th to 38th.
It turns out uncertainty around Keystone and other pipelines hasn’t had an effect, since investors priced that into the market, and it’s not the cost of oil either because that’s not a regional problem, it’s worldwide.
According to report co-author Dr. Ross McKitrick, professor of economics at Guelph University, it’s being caused by uncertainty around the new NDP government and its policies.
“In 2014, only five per cent of worldwide investors thought that was a problem for Alberta, in 2015 that’s now up over 50 per cent,” he said. “I think the Alberta government has opened a number of major portfolios that could potentially cost investors quite a bit.”
He explains it happened back in 2007 when the Stelmach government announced a royalty review too.
“That’s playing out now as well. And back then it took a couple of years for Alberta to get its reputation back,” he said. “You need to rebuild the sense of stability for investors and it took Alberta about two years to get back to its customary position in the rankings.”
McKitrick says the government needs to make some decisions fast because as this survey shows, as long as things are up in the air, Alberta is going to keep taking hits.
“The Alberta government does need to be careful about the kind of perceptions it’s creating with so many major policy changes on the table, it could take years to win over the trust of investors again,” he cautioned.
