Will it be déjà vu all over again?

The effect of the OPEC price shock, combined with the efforts of the Progressive Conservative government of Premier Peter Lougheed to negotiate a new royalty framework, contributed to a dramatic increase in resource revenues.1 In the eight years following the fi rst OPEC oil price shock, resource revenues averaged $2.5 billion per year.2 This rapid growth in resource revenues and the recognition o [...] The recession slowed the economy and the NEP not only slowed the growth in resource revenues but prompted the provincial government to increase spending in the form of support to the energy industry.7 The effects of these events on Alberta’s budget surplus were mitigated by the decision in 1982 to divert the investment income earned by the AHSTF to general revenues and to reduce from 30% to 15% th [...] The reality that Alberta had been living through a transitory boom took a remarkably long time to sink in, and it was only after eight years that the inevitable adjustments were made to put the province’s fi nances back on the road to fi scal rectitude.151 GETTING BACK ON TRACK Concern over the long string of defi cits that followed the collapse of oil prices in 1986 provided the focus of the prov [...] The authors argue that the slow response was the reason for the need to introduce large cuts to federal and provincial spending programs in the 1990s. [...] Moreover, the fi gure uses the average of the observations of the oil price for the fi rst seven weeks of 2009 ($43.78) to represent what might be observed during the whole of the year, which, if it holds, would hover just above the price that prevailed in the disastrous 1980s.