Jason Kenney's win-win-win announcement might not give him the big win he needs
Suspending the gas tax gives Albertans relief at the pump, but will it help the premier keep his job?
After initially ruling it out in the provincial budget two weeks ago and then again in public comments one week ago, Premier Jason Kenney announced consumer relief on Monday for rising gasoline and electricity prices.
From April 1 to July 1, Alberta will no longer collect the provincial gasoline tax of 13 cents per litre. The tax will continue to be suspended as long as the average price of West Texas Intermediate (WTI) oil is above $90 US a barrel. For electricity prices, the government is providing a $50 per month rebate for three months to more than one million homes, farms and businesses.
This announcement is a win-win-win for Kenney. However, with a clear eye toward the UCP leadership review on April 9, these three wins may not be sufficient for him to remain as leader.
Win number 1
The first win is responding to Albertans' rising cost of living.
Due to a combination of pent-up demand from COVID and Russia's invasion of Ukraine, the price of oil and natural gas have dramatically increased. According to GasBuddy.com, Alberta's average retail gasoline price has spiked over 20 cents, from $1.38 on February 1 to $1.60 on March 7. Similar increases in natural gas prices have occurred. In January it was $3.89 per gigajoule (GJ), rising to $4.79 so far in March. This has led to massive increases in people's utility bills for home heating and electricity.
Pocketbook issues are always political. Regardless of the actual causes, the current government takes the blame when the cost of living rises. However, in 2022, partisan politics have infused the cost-of-living debate even more.
Pierre Poilievre, the front-runner in the federal Conservative leadership race, has been bashing the Trudeau government for months over inflation, even coining the term JustinFlation. As provincial conservatives, the Kenney government needed to take some action to reduce the cost of living, while at the same time blaming the Trudeau government for causing the problem.
Win number 2
It is estimated that the tax cuts and rebate program will cost the Alberta treasury close to $1 billion (more if the gas tax suspension goes beyond July 1). However, this would easily be covered by the rise in royalties that accompanies increases to the price of oil and natural gas.
For example, over a full year, provincial revenue climbs $500 million for every dollar increase in a barrel of WTI.
In February 2021, Alberta projected a $18.2 billion deficit, but in February 2022, it produced a $500 million surprise. Having the first balanced budget in years was due to $13.5 billion in non-renewable resource royalties (the highest in Alberta's history). Just as significantly, the budget estimated that WTI would average $70 a barrel for 2022-23 and it is currently above $120. This means that Alberta, unlike other provinces, easily has the fiscal capacity to subsidize gas and electricity costs for Albertans.
Monday's announcement has clear echoes of Ralph Bucks. Back in 2005, Alberta was debt-free and money was still rolling into the treasury, so Premier Ralph Klein announced that the government would issue $400 cheques to every adult and child living in Alberta. It was dismissed as reckless by many experts, but was politically popular.
Win number 3
Suspending the provincial gas tax also allows Kenney to simultaneously revert to one of his favourite pastimes: bashing Justin Trudeau over the carbon tax.
In his news conference announcing the gas tax relief, Kenney made sure to emphasize the fact that an increase in the carbon tax kicks in on April 1.
Kenney despises the carbon tax. His first bill after becoming premier was revoking the provincial carbon tax introduced by the Notley government. When the federal carbon backstop kicked in, Kenney sued the federal government. Despite losing his case at the Supreme Court, Kenney never misses an opportunity to demonize the carbon tax.
Contrasting suspending the provincial gas tax while the federal carbon tax goes up is another win for Kenney. The fact that the increase in the federal carbon tax is only two cents per litre (when gasoline has jumped 20 cents per litre in a matter of weeks) or that over 90 per cent of Albertans receive a rebate on the amount that they pay, does not matter to the political argument that Kenney is making.
And it is not just the carbon tax.
Dale Nally, the Associate Minister of Natural Gas and Electricity, placed part of the blame for rising electricity costs on the "punishing policies from the former provincial government and the federal government." This allows the UCP government to say that they are helping ordinary Albertans hurt by the Trudeau-Notley Alliance (revisiting its messaging from the 2019 election campaign).
The leadership vote
Beyond these three wins, there is another political dimension to subsidizing energy costs. Every decision made by Kenney — addressing fuel costs, balancing the budget, dropping COVID restrictions, shuffling the cabinet — all need to be viewed in light of his leadership review on April 9.
Since this is a win-win-win announcement, that must mean that Kenney will benefit on April 9, right? Not necessarily. It is just as likely that people have already made up their minds and the energy subsidies will not make a lick of difference. The fact that several thousand UCP members have already registered to vote is not a good sign for Kenney. Just as in general elections, the rule of thumb is that when turnout rises, change is on the horizon.
There is also another fascinating parallel between Kenney's energy subsidies and Ralph Bucks. Ralph Klein made his Ralph Bucks announcement in September 2005 and cheques came out in 2006. Nevertheless, just a few months later, at the March 2006 PC leadership review, Klein received a lukewarm 55 per cent support and resigned as leader.
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