Let's play the oil guessing game!

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Here’s a little secret about Newfoundland politics that not a lot of people know: Natural Resources Minister Tom Marshall takes the weirdest stuff personally.

It’s the little stuff that irks him.

More than once, after I write a story about public sector pensions, or tax policy or something, he’s called me up and talked my ear off the next day.

It’s not that I got anything wrong per se, he’ll explain; it’s just that technically I didn’t explain it exactly right.

One time, when I wrote that public sector pensioners didn’t have their benefits indexed to inflation, he called me up to explain that while that’s true, they are partially indexed. After about 10 minutes on the phone, I asked him if he wanted us to run a correction or a clarification in the paper. Oh no, he said, nothing like that. He just wanted to make sure I understood it properly.

Another time, Marshall cornered a group of reporters on Kathy Dunderdale’s campaign bus in the parking lot of a Grand Falls hotel during the 2011 election, and explained to them — in excruciating detail — why an obscure NDP tax policy proposal wouldn’t work.

(If you ever want to know why the government can’t get rid of the “tax on tax” on gasoline, just give Tom a call; he’s already looked at it, and I’m sure he’d be happy to explain.)

Anyway, all of these little things are small potatoes for Marshall compared to his big pet peeve: the price of oil.

Give him a chance, and he’ll talk to you for hours about how the government comes up with its oil pricing forecasts, and why it’s hard to get it exactly right.

He insists that the opposition parties couldn’t do any better, and they just criticize the government but they never get held accountable.

So on budget day, when I happened to bump into Marshall in the hallway up at Confederation Building, he cornered me and insisted that I ask Liberal Leader Dwight Ball and New Democrat MHA George Murphy (his two most consistent oil-forecast critics) what their predictions were.

Marshall basically said, the government is forecasting US$105 per barrel for oil in the coming budget year. Hindsight is 20-20, but if the Liberals and the NDP think that’s wrong, let them say so right up front.

So that’s what I did. You’re welcome, minister.

*** 

First up, here’s what Dwight Ball had to say on budget day.

“We were out yesterday saying that the number should be closer to $100 per barrel. We know there’s a lot of volatility right now in the world price of oil. Currency levels too, who knows where this is going to go? So we would have liked to see a more conservative number.”

“It is very difficult; we understand that. We’ve been saying this for quite some time.”

“It is a difficult number to pick. The $105 right now, let’s face it, as Newfoundlanders and Labradorians, we hope this number goes higher than that, and we can see our oil royalties at a much higher level, but I don’t really see it happening right now, when you look at what’s happing around the world, you know, with oil production.”

To sum up: Ball doesn’t want to be nailed down, but he thinks $105 per barrel may be high-balling it a little bit. The government should’ve gone with $100 per barrel instead.

*** 

Now, on to the NDP! George Murphy, of course, made his name by running through the formula and predicting whether gas prices will go up or down on any given week. He spends a lot of time talking about oil and natural gas issues in the House of Assembly.

Here’s what he said on budget day:

“That depends on the variables that they used whenever they figured out their $105/barrel. There’s too many variables.”

“I won’t put a number on it until I see the variables that they’ve used in their decision, but I’m kind of settling on $95-$100/barrel.”

Now, I don’t know exactly what “variables” he’s talking about here.  I’d like to see the PIRA forecasts that the government uses, and all the other methodology too, but the bottom line is that the game we’re playing is “Guess the price of oil.”

I guess Murphy is hedging his bets a little bit, but we’ll put him down as predicting between $95 and $100 per barrel.

***

There’s one last person we should heard from in all of this: Finance Minister Jerome Kennedy. On budget day, Kennedy responded to a question from a reporter who said that some oil forecasts for the coming year are as low as $80 or even $60 per barrel.

Here’s what Kennedy said:

“You say that there are predictions that are lower than that, and I would say to you that those predictions are out to lunch.”

“The price we’ve chosen at $105 is lower than the prices that have been put forward by others.”

“You have to look at the geopolitical factors, you have to look at what takes place in the middle east. You have to look at supply and demand, growth in China, the shale oil revolution in the United States. You take all of that together, and you try to come up with a price for a year. When you get into the longer term, the principles of supply and demand have more significance, so I’m as confident as anyone can be at this point, in terms of the $105.”

So there you have it. Six months from now, if it turns out that $105 per barrel was wildly inaccurate; this is what everyone said on budget day.

And if Minister Marshall or any other members of the provincial cabinet have suggestions for future blog posts feel free to corner me in the hall up at Confederation Building, or e-mail me at jmcleod@thetelegram.com.

(Actually, that goes for everyone else too. If you think there’s an issue I should tackle on the blog, get in touch with me.) 

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  • Ed Hollett
    April 12, 2013 - 13:41

    Two things: First, it is hysterically funny that Tom gets upset with others over mistakes since Tom has had great difficulty getting many things in finance right himself. Second, the price of oil is not Tom's problem and never has been. It is irrelevant to accuracy, as his chronic record of budgeting deficits shows. oil forecasts only give Tom a rough idea of how much he will overshoot the forecast. Every single budget since 2003 has forecast a deficit on a cash basis. The problem is not that oil is volatile, it is that Tom and his colleagues always plan to spend more than we can afford.

    • JM
      April 17, 2013 - 19:23

      So how will the house of assembly pass a budget assuming 105$/barrel when as of April 17 th oil is trading at 97$/barrel. what a difference a week makes. We can't talk about real issues though.