The paper will focus on economic approach of examination of two different jurisdictions over the oil reserves in two different countries. The comparison between Alberta and Norway in the oil reserves will be made. First the approach of each country will be presented and basic statistics. What effect did policies had on the recent downturn in oil prices and which policy and strategy can better work on the long turn will be answered.
The difference between the countries is in the ownership. Norway natural resources are in the majority the property of the government and in Canada the ownership is based on the actor who attracts the oil from the ground and therefore the private hands. Norway high taxes are funding the welfare model, with sharing resources. With 2.30 million barrels per day, Alberta has an annual deficit and debt for about $10.6 billion. In comparison the Norway with 1.48 million barrels per day has no government debt or deficit. Two different strategies have been implemented. The government in Norway maintains the majority share of its oil company. In the country taxes for oil companies are as high as 78%. Both countries have shaped funds, where Alberta Heritage Savings Trust Fund where 30% of the revenue was going to the fund, but it is not active any more since the 1987. In Norway the free education exists with the government pension Fund that started in 1990 and today it is worth around $905 billion. The reason lies in two different economic developments. Can a comparison be made between total difference oil strategies and different policies in both countries? The bad management has been seen in Alberta but the differences between the countries are vast. The Norway had imposed a very high tax even before finding the oil on the ground where Alberta did not. The difference is in the ownerships since resource wealth in Canada goes to the private hand and in Norway to the whole population. The taxes in Canada are very low. In Norway 28% corporate tax with additional 50% petroleum tax on profits, this results in the 78% of total tax. The law in the country allows the government to take maximum of 4 % a year of the savings funds. In Alberta the tax for the oil companies is at 25%.
The recent downturn prices have more effect on Alberta that on the Norway. The Norway government does not cut the health care, social services and education when the oil prices drop. The revenue in the Alberta oil sector is based on the taxes per barrel of oil produced and is therefore tied to the fluctuating prices of oil and therefore more intact by price changes. The Norway tax revenue comes from oil and gas companies. When oil prices drop not all countries loss the same since it depends on the policies imposed.
In the long turn the strategy of Norway seems to be better. The oil is a non-renewable source and Norway will have the opportunity to start to develop other and new technologies from their fund, but Canada only takes from it and gives nothing back into the fund. Dealing with climate change should also be taken into an account. The number of employees in this place is also an important measure. The oil and gas can be more valuable if left in the land since the prices will in the future rise and the value of oil will increase which can contribute to the rise of the country’s economy. The greenhouse gas emissions should also be taken into an account and the threat of the climate change. Environmental costs are high. Policy with less oil production will lead to the higher job creation and more wealth that can be shared among the general public. State owned Oil Corporation has better approach and chances in the future. Alberta is allowing other sectors to stagnate, which is not good on the long turn. The development is seen also unsustainable with a focus on the non-renewable resources such as oil.
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