Too Big To Fall: Slumps
I've been thinking about slumps lately. This is not surprising and I'm probably not alone. The Oilers, this city's hockey team, are in a slump and coincidentally so are oil prices. Both of these things are happening concurrently and they seem to be having the psychological effect of a double gitch pull on the locals. People, of course, are yammering loudly about the hockey club. Some fans have gone so far as to pay for commercial billboards, calling for the firing of top brass. In a municipality with the slogan City of Champions, having your team's winning percentage ranking dead last in the league and the worst in franchise history makes people as frothy as a double latte. The petroleum slump is more complex and less talked about but it's picking at people too. No matter where you sit on the global warming debate, if you live in Alberta, you pay for your lunch directly or indirectly from the momentum of oil money.
Last week, in a spectacular death spiral in crude-oil futures West Texas Intermediate CLF5 settled Thursday at $59.95/barrel, a more than five-year low. This threatens to deliver a serious shock to Canada's banking system, according a research note published Pavilion Global Markets.
The slump looks like this.
Earlier this week, the International Energy Agency (IEA), an energy think tank, said that further price drops in oil would heighten the financial risks to "highly leveraged" producers, and countries that are heavily dependent on oil revenues. They were singling out Russia and Venezuela but they could have been speaking to everyone on my block. Like many Canadian cities, my house is situated on the corner of Highly Leveraged Avenue and Credit Line Street. Continued downward pressure on oil prices will undoubtedly shake the wheat from the chaff around here, as much as it will in Russia and Venezuela. While I am no economist, I think buying a used set of chrome testicles for one's pick-up should be quite affordable in the new year.
Personally I know I'm not too big to fall. Often I'm outdoors before sunrise, on ice, in poor light conditions, running. One day I will fall, I know this, but to mitigate this eventuality I've outfitted myself with some gear. I have a headlamp. I have shoes with cleats. I catalog dangerous dips and weird ground slopes and commit them to memory. That said, a fall is different than a slump. A fall is swift. A slump is gradual. You'd think you should be able to prepare for a slump.
What I find interesting is that most people and governments are never ready for slumps. In Alberta, this is particularly baffling. Our driver is a volatile commodity: energy. Energy prices rise and predictably they fall. And when they fall, our government (singular as its always the same one) and our people never seem to be prepared. Jeffrey Simpson recently wrote an article related to this. In a piece called 'Two Challenges Alberta Keeps Ducking' Mr. Simpson, who has some challenges of his own, mostly in the hair department, says, "What Alberta needs....is a steady revenue stream to protect the province from the vagaries of oil prices set elsewhere."
Because of all this, or maybe because of the onset of Christmas and all the extra activities associated with the holidays, I've noticed I am slumping more too. As my task list and event commitments grow, my posture seems to be reflecting the Christmas crush.
If oil prices continue to slide, this may become a permanent posture for many Albertans well into 2015.
Time on Russia's Collapsing Ruble
"Barring a rapid turnaround in the oil price, there are only bad and worse outcomes from here on."
"Husky Energy Inc. says its 2015 capital budget will be $3.4 billion, about $1.7 billion less than it expects to spend this year on major projects, as it cuts spending plans for its various operations in Western Canada by about 42 per cent."