Tuesday November 06, 2007

Canadian oil industry basks in profits, and tax cuts

therecord.com :

Crude oil prices are at record highs, and showing no signs of declining. Most of its current production is either conventional or from the oilsands, both at historic costs that are far below current price levels. Profits are fattening balance sheets and individual bank accounts at a rate that would make one of the legendary robber barons of the late 19th century blush. Oil and gas industry profits now threaten the banks for top-of-the-heap bragging rights as the most profitable industrial sector in the country.

The one dark cloud on the industry's horizon was in Alberta, of all places, where the provincial government finally found that it could no longer resist political pressure to get a fair share for the public of Alberta's burgeoning oil and gas wealth. First, the government was forced to appoint a panel of experts to study Alberta's royalties and to compare those royalties with those collected in other jurisdictions. And while increases rising to $1.4 billion a year in higher royalty payments fell short of the $2 billion a year recommended by the panel, newly selected Premier Ed Stelmach ruined the industry's day in mid-October with an announcement of significant royalty increases. But before the industry hotshots had time to consider the implications of these changes for their plans for a third or fourth home in London and their position on the waiting list for that new Ferrari or Porsche, their old buddy Jim Flaherty came riding to the rescue, and gave it all back, and more.

Just looking at the newly announced corporate tax cuts - not counting the ones that were announced previously but haven't yet taken effect - Flaherty is planning to reduce corporate tax rates across the board by 3.5% cent by the time we get to 2012. Oil, gas and coal extraction alone accounts for roughly 20% of the federal government's corporate tax revenue, or more than $8 billion in corporate tax revenue in 2007. That means that the new 22.5% tax cut will save the industry about $1.8 billion, nicely above the additional $1.4 billion that Alberta is asking them to pay.

- I'd suppose the Canadian oil & gas industry wasn't quite going to let government get in the way of their enormous profits. One of the tar sands companies, Suncor, was threatening to pull out of a $1 billion additional investment which would have created more jobs, and more importantly, more tax revenue, if the government had gone ahead and really made an impact on their profits.

(2007-11-06 12:49:13 SGT) [Energy] Permalink

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