5 - Remember the Bubble?

At the time of contract negotiations, there were feelings of fear and an overwhelming pressure that we needed to sign the "deal" or else...

The four-year contract that was offered included a three-year wage freeze, followed by a two per cent increase in 2015 and a one per cent cash bonus in the final year (that we never received because we were legislated back)

CBC article

For taking the wage freeze, we mainly got a C2 work study out of it. This is the current workload study being done which examines what the job of a teacher entails. What I find a bit entertaining, is that by the time C2 is complete and a proposal is made, the entire study will be outdated. Remember that whole "Inspiring Education" thing where "everything is changing". Maybe we will get another study in 2016?

(update - The Task Force for Teaching Excellence will issue its report by mid-March of 2014. )
Regardless, we understood on the government side that oil was 'tanking' and that the the province had no money to offer. So we "accepted" a FOUR-year deal legislation. 


ALL ABOUT OIL

The Alberta government came up with the term "bitumen bubble" to explain how it was likely to lose almost $6 billion in royalty revenues. Later news articles would eventually talk about a "burst" as prices started to rise.


What was this bubble that changed everyone's lives? I am glad you asked!

First Energy posts a number of oil prices. Specifically:

- Western Canada Select (WCS)       <--local "lower-grade" oil
- West Texas Intermediate (WTI) <--American "higher-grade" oil

"Canadian producers (WCS) have been suffering through a prolonged period of discounted domestic prices because of oil export bottlenecks that often cause an oversupply."

This differential between WTI and WCS, as it is called, is bad.

How bad, you might ask? From Baytex, I grabbed some historical values and did some fancy excel work. Click on it to enlarge:

At the time of writing this, the WTI price is $102.59 and the differential is 26.68.

Essentially, a large grey "differential" value is not good. The higher the grey line, the more our oil is discounted. The bitumen bubble alarms peaked at the red vertical line, around December 2012. What stands out is how much it has ALWAYS fluctuated. Just after the red line, look at how our WCS price rebounded (and then fell again).

Many people questioned the forecasting because Alberta's 2012 budget was based on the forecasted WTI price at $99.25/barrel. This is the green line. Around the time of the bubble, we were selling a devalued product (represented by the differential) like has happened repeatedly in the past. I'm not sure how much I agree, but the entire variability of our government revenues seems strange.


IN RECENT NEWS

Alberta Budget Moves Towards Surplus
This article is from February 26th, 2014 . 

"Higher oil prices, strong tax revenues and the weakening Canadian dollar have helped the Alberta government move its current operating budget toward a year-end surplus."

I know many teachers paychecks have actually decreased because of a new gov't pension reform policy and increased union fees when combined with the James Bond-like 0002. It stings a bit seeing how variable that chart above is. Within half-a-year of the "bubble", oil prices rose up to above-forecasted levels, even if they have dipped back down since.

Four years is a long time.