Breaking the natural resource revenue boom-bust cycle in provincial finances

As the world price of oil has fallen by almost $100/barrel in the last year or so, provincial finances in places like Alberta, Saskatchewan and Newfoundland and Labrador have been savaged. But it is all so unnecessary if only these provinces and others dependent on non-renewable natural resource revenue would be guided by Jim Dinning’s insight that such revenues are “non-reliable”. and are known to be so by anyone even slightly conversant with the history on NR prices and the nature of government spending. In my late December column for the Globe’s Economy Lab feature, I lay out the case for such provinces to discipline themselves by assuming throughout the commodity cycle that the lowest price in the cycle will prevail. The money set aside during high prices can then smooth out the ups and downs. Don’t spend it if you haven’t got it, people, especially when provincial spending is notoriously inflexible, unlike these revenues!