Most people in Canada probably believe that Alberta is a place of strident, eternally right wing politics. It is the one province in Canada that has had a right wing political dynasty going back for almost a century - from the populism of the Social Credit Party through to the one-party Tory state of the last three generations. In this week's federal election, voter support as high as 80% for the Tories was not that uncommon in ridings throughout the province. It's no wonder that people feel that this is an impenetrable bastion of oil fuelled reaction. As one commenter on an earlier blog post put it:
"Alberta functions precisely as any other petro-state does and the same is true of the Petro-Pols of Parliament Hill on both sides of the aisle and in every party. Get used to it because it has free rein now."
But things aren't really that rosy in the Wild Rose province. According to the Canadian Bankers Association, the delinquency rates for Alberta mortgage holders are the highest in the country, at close to one in a hundred mortgage holders. That's five times higher than in Ontario and almost eight times higher than it was in 2007. The reason is pretty straightforward: the oil boom at the beginning of the last decade created a rush of workers to work in the Alberta oil fields. That created massive inflation in the real estate sector with house prices jumping a full 50% between 2006-2007. When the crash hit in 2008 and oil consumption dropped, the real estate market took a hit along with the upward trend in wages. Suddenly people were struggling to cover the mortgages on houses whose value was dropping month after month. It wasn't as severe as the housing bubble in the US, where delinquency rates are still at around the eight percent mark but it was significant.
What's interesting is that the Globe article, attached below, suggests that the dark days are over for Alberta homeowners as oil prices recover along with the global economy. Except that reports out of the US suggest anything but golden days ahead, with jobless numbers climbing along with inventories and a decline in service activity. This has led to oil price deflation, as oil futures have declined from a peak of $114/barrel to around $103 in less than a week. That's a ten percent drop - and there's more to come:
"The ongoing civil war in Libya and unrest elsewhere in the Middle East has added a risk premium of around $30 to a barrel of crude,'' Capital Economics said in a report. "
We expect the risk premium to fade as and when the Libyan crisis eases, helping to drag prices back within OPEC's $70 to $90 range by year-end.''If a fifty percent decline in oil prices come to pass, that's going to deliver a big hit to the Alberta oil patch and I'll give you one guess as to who is going to be expected to bear the brunt of that decline. If that happens, you can expect the fragile, over-leveraged real estate market to tank in a very big way. The only answer that the Tories will have is to provide more subsidies to oil corporations, which will do nothing to alleviate the effects of the economic crisis on the lives of workers. That doesn't mean that the frustrations and bitterness will go to the left - it could just as easily go to the right, especially in a province where there is little presence for the left. But if the unions can increase their public presence, demonstrate their muscle in resisting corporate attacks. And if the left, in particular the NDP, which is the largest and most visible sign of the left, can put itself forward as an alternative for working people, the Tory dynasty could face a rocky road in the near future.
Alberta's delinquent homeowners lead the pack - The Globe and Mail