by Duncan Cameron
In the last year the price of a barrel of oil has gone up by $45 or 65 per cent. It averaged $70 in 2007, while this year it is looks to average $115.
In Canada, as recently as 2003, the cost of producing a barrel of oil, including royalties, averaged only $5.57. Of course, that year Canadian royalties were again among the lowest in the world, 23 cents a barrel.
For natural resources, the difference between the cost of production, including normal profits and the selling price, represents the resource rent, a one-time benefit to the owners. If we assume the cost of production has nearly doubled since 2003, including small royalties increases in Alberta, the resource rent per barrel this year is $105.
This resource rent money has been treated as a windfall profit and has gone directly into the pockets of the oil producers. As many of them are foreign-owned, the profits go directly out of the country.
Since, under the constitution, the beneficial owners of the resources are the people of the provinces where the resources are located, the rent belongs to the people, and it should have subject to an excess profits tax. Indeed when the price of oil increased in the late 1970s, the Alberta government introduced just such a measure.
