Earlier this month, I was talking to someone on Twitter who claimed that when the Alberta NDP were in government, they drove away business investment. This isn’t the first time I’ve heard this argument made, so I thought I’d look at the data to see how true that is.
Statistics Canada tracks capital expenditures for each province, and the dataset runs from January 2006 to January 2021.
Here’s what total capital expenditures looked like in Alberta during that period.
Sure enough, capital expenditures between 2015 and 2019 were definitely lower than levels leading up to when the NDP were elected.
But let’s look into those numbers a bit more.
First, Let’s look at just how much capital expenditures increased by each year.
Over the last 15 years, there have been 6 times when capital expenditures dropped: 3 of those times were during the NDP administration: 2015–2016, 2016–2017, and 2018–2019. Of the other 3 times, 2 of them occurred under the PCs (2008–2009 and 2014–2015) and the other under the UCP (2019–2020).
Here’s how it breaks down per party:
It doesn’t seem to me as though the NDP saw the largest losses in capital expenditures.
Also, did you notice how the red bars seem to nicely coincide with the Great Recession, the 2015–2016 Alberta recession, and the COVID–19 economic shutdown?
Maybe it’s not simply a matter of which party is in power.
Even so, focusing on just the losses isn’t the best way to get a picture of which party did the worst job (or best job) of attracting capital investment. After all, if a party has a couple of bad years, but lots of good ones, then it may not portray things accurately enough.
So, let’s average out the increases and decreases.
Now, let’s average how much was invested in total capital expenditures:
|Party||Average annual investment|
So, while it might be true that the NDP saw larger drops in investment dollars during their administration, they didn’t see the lowest numbers of average annual capital expenditures—that was under the UCP.
Let’s compare Alberta’s total annual capital expenditures with that of all the other provinces.
So this is intriguing.
It’s pretty clear that the other provinces—for the most part—saw drops in capital expenditures during the Great Recession and the COVID-19 economic shutdown. As well, Saskatchewan and Newfoundland and Labrador also seemed to be affected by what drove Alberta’s 2015–2016 recession.
It seems to me that what’s causing these drops in investment involves more than whether the NDP was in power, considering that over the last 15 years the other provinces have had all sorts of parties in power yet still saw some losses in capital investment.
Here, let me show you something else.
This chart compares capital expenditures within Alberta as of January of each year and the price of West Texas Intermediate price of oil.
The fluctuations in capital investment roughly mirror the price of oil. As the price of oil increases, capital investment increases, and vice versa.
Capital investment was skyrocketing between 2012 and 2014 not because conservatives were in charge in Alberta, but because oil prices were increasing. Now, the chart doesn’t capture it very well, but between July 2013 and July 2014, WTI averaged over $101 a barrel. It dropped to as low as $30.32 a barrel in early 2016.
And when the oil and gas sector accounts for 60% of your province’s capital expenditures (which it did between 2006 and 2014), then your province is really going to feel the pressure when oil prices drop.
Over the last 5 years, oil and gas has averaged only 41% of total capital expenditures in the province. Either the province is trying to diversify the number of baskets it’s putting its eggs in, or the oil and gas sector frontloaded their investments a decade or so ago to get the bulk of the infrastructure built while oil prices were high.
It wasn’t just oil and gas, however. Most sectors were affected by the 3 recessions. However, there were a handful of sectors that saw increases to capital expenditures while the NDP were in power.
For example, the manufacturing sector saw the largest increase, going from $2.6 billion in capital expenditures in 2015 to $3.9 billion in 2019, averaging an additional $326 million in investments every year. That number dropped down to $2.9 billion as of this past January.
As well, the real estate sector increased by $265 million—from $2.1 billion to $2.3 billion—during the same period ($66 million a year on average). That sector has since dropped to $1.8 billion, at least as of January 2021.
This past January, WTI was sitting at US$52 a barrell. As of 1 November, it was US$83.91. That’s the highest it’s been since 2014. If that price can stay there, we might just see a jump in capital investments that we haven’t seen in year.
Except, as of 1 December, WTI was at US$65.57, so maybe relying on oil and gas capital investments isn’t a long-term strategy for economic stability of Alberta.