Soaring oil prices could save Alberta's Conservative party from itself

In Alberta politics, you can never count out the Conservatives.

Despite leading a government that bungled the management of COVID-19 more badly than almost anyone else in North America, made a failed $1-billion bet on the Keystone XL pipeline, and foolishly embraced an anti-democracy convoy marbled with violence and racism, Jason Kenney’s UCP is now polling ahead of the Opposition NDP. And while Kenney himself may not lead the party into the next election in May 2023, it should be clear by now the UCP will have a puncher’s chance at getting re-elected.

As the Toronto Star reported, the most recent poll from Janet Brown, a reputable independent pollster in Alberta, has the UCP winning 47 seats to the NDP’s 40, a significant improvement on her November 2021 poll that had the UCP taking just 35. Even two months ago, this didn’t seem plausible. A January 2022 poll from Angus Reid had the NDP ahead of the UCP by 11 points, as its quarterly polls had consistently shown since March 2021.

So how did the UCP rise from the dead? Oil prices, of course.

The party’s 2022 budget, which includes a projected surplus that would have been unfathomable even last fall, is premised on oil prices averaging $70. But oil prices are much higher than that right now and look set to surge even higher as Russia’s oil exports fall off the market.

Pierre Andurand, a veteran oil trader and market watcher, suggested they could go as high as $200 a barrel in 2022, while Amrita Sen, the founding partner and chief oil analyst at Energy Aspects, thinks $170 to $180 is in the cards. “We have never tested what the price would need to be [to destroy demand],” she said.

For the Alberta NDP, this would be an unqualified disaster. That’s because it would give the UCP an unprecedented windfall right when it needs to win back skeptical voters. As Finance Minister Travis Toews said recently, “The higher energy prices go and the more oilsands projects that move from each pre- to post-payout, the more sensitive the Alberta government royalty revenues become, relative to WTI prices.”

In 2021, each $1 change in the price of oil meant approximately $230 million more in Alberta’s treasury. But in 2022, because of those changes in the tax status of oilsands projects, it moves to $500 million.

If oil averages $100 a barrel for fiscal 2022, a figure that looks increasingly conservative, that will give the UCP $15 billion to play with. If it averages $120 a barrel, it will mean $25 billion. And while the party could theoretically use that to fund health care and education, it’s far more likely the UPC will try to find a way to put it directly into the pockets of Alberta voters. A one-time prosperity bonus of $1,000 for every man, woman and child in the province, for example, would cost just over $4 billion.

Would that be a crass act of political cynicism? Yes. Would it be effective? Also yes.

So far, at least, Rachel Notley's NDP doesn’t seem to sense the political danger associated with this tsunami of cash that could be headed its way. Last week, the NDP announced its intention to introduce a bill that would “invite all Albertans to invest directly in the growth of Alberta’s tech and AI sectors.” Encouraging people to invest in something as risky as venture capital seems more on brand for the UCP than the NDP, and it’s not obvious how this would put more than a tiny handful of votes into their column, if any.

The lack of urgency in both the NDP’s messaging and strategic thinking, on the other hand, is abundantly clear — and worrying if you’re someone who doesn’t want to see the UCP get re-elected.

Yes, it’s possible the UCP leadership vote on April 9 will lead to a fracture in the party that pits Kenney against Brian Jean and potentially splits the party into two. But that’s the political equivalent of buying a lottery ticket and hoping it can pay your mortgage. The NDP can’t afford to count on it and will almost certainly end up paying a high price if it does.

There’s still time for the party to craft a coherent message and communicate it to voters. The gusher of cash coming from the oil industry can just as easily be used to fund new schools, better infrastructure and a renewed relationship with Alberta’s nurses and doctors.

The NDP should make the argument it’s better equipped to spend and save those billions than the UCP, and that the money should be used to diversify the province away from fossil fuels instead of doubling down on them. But the longer the NDP waits to make those arguments, the less likely they are to resonate with voters.

If the NDP waits too long, it could easily cost the party an election it looked like they couldn’t lose.