A driver waits to fill his car with fuel at a petrol station in Riyadh, Saudi Arabia, December 22, 2015. A true petro-state would have suffered greater losses in the oil downturn than Canada has.Reuters/Reuters
Canada has turned out to be a rather poor excuse for a petro-state.
If it was one of the bona fide petro-states, the economic and social damage caused by the collapse of crude prices would be much worse than it is. The economy is highly influenced by oil, but it is not wholly reliant on it.
The energy downturn has exacted its punishment, squelching economic growth and knocking the domestic currency to its lowest level in more than a decade.
The effects have been particularly acute in Alberta, where unemployment has swelled to 7 per cent from 4.5 per cent a year ago as the energy industry shed workers by the thousands. The provincial NDP government has projected a deficit of $6.1-billion while borrowing big to stimulate the economy with infrastructure projects.
The bond rating agency Standard & Poor's pushed Alberta's oily struggles to centre stage just before Christmas when it downgraded its credit rating to double-A-plus from triple-A.
These hits are painful, but they are far from knock-out blows. Let's put things in perspective. Real petro-states such as Venezuela and Nigeria, both now in severe economic crisis, could never dream of credit at one notch below the safest possible and single-digit joblessness.
Former prime minister Stephen Harper drew frequent allegations that his Conservatives were dragging the country to petro-statehood with policies aimed at emphasizing oil over all other industries. The Tories certainly expended an outsized pile of political and diplomatic capital on energy greatness, achieving little, but the overall economy is somewhat shielded by its diversity.
Not so with the real petro-states.
Benchmark Brent oil has hovered in the range of $35 to $40 (U.S.) a barrel for the past three weeks, capping off a year in the doldrums, and even the mightiest of crude producers have been forced to take drastic measures that could dramatically change their societies.
The most stark is Saudi Arabia, the Organization of Petroleum Exporting Countries kingpin whose sway led the cartel into the market-share-focused strategy that has crushed oil prices.
This week, the kingdom, which has lavished its citizens with oil-funded handouts, reduced fuel subsidies, moved toward privatizing some industries and instituted new taxes in what has been called the largest shift in fiscal policy in recent memory.
The moves come after Saudi Arabia issued bonds for the first time in almost 10 years to deal with dwindling government revenue due to the oil price fall. The annual deficit is pegged at $136-billion, which, according to Bloomberg, is 16 per cent of gross domestic product.
And, with its world-leading oil reserves, Saudi Arabia is the best-positioned petro-state for the downturn, which some analysts predict could drag on through the remainder of the decade. Not so for its compatriots.
Venezuela is in far worse straits, with its economy in shambles. The OPEC country derives almost all its hard currency from oil sales, while subsidizing fuel so much that it is nearly given away.
President Nicolas Maduro has said oil revenues are down 68 per cent from last year. Inflation sits at more than 200 per cent and food shortages are commonplace.
Opponents of Mr. Maduro won enough seats in the National Assembly in recent elections to challenge the administration, setting up a political showdown in 2016.
Non-OPEC Brazil, which had aimed to be an oil superpower on the strength of massive offshore reserves, faces a worsening recession due to the collapse in crude and a crippling corruption scandal that has enveloped its state oil company, Petrobras.
The term petro-state is often used to disparage countries with large energy sectors, but according to Emma Ashford, a visiting fellow at the Cato Institute, the right-of-centre U.S. think tank, it more accurately describes nations with the highest dependency on oil rents.
Canada, Ms. Ashford wrote in a recent article, is among major crude producers that have diversified economies and broad tax bases, so it is not a petro-state.
It's cold comfort to those suffering from oil's slide, but it's good to know that Canada is more than a economic one-trick pony.