Todd Korol/Reuters

Alberta premier Alison Redford has put her government in national headlines with news that the province, at a time of high oil prices and outstanding labour-market conditions, is going to finish with an enormous deficit for 2012-13. The actual shortfall for the first half of the year came to $1.3 billion, and the 12-month total might be more than $4 billion. Redford blames what she calls the “bitumen bubble.” Alberta has sometimes gotten into fiscal trouble because of the unpredictability of benchmark prices for oil, but this time it is getting crushed by poor regional prices as the U.S. Midwest transforms from needy buyer to massive seller.

Economists and pundits inside and outside Alberta have used the opportunity to repeat long-standing pleas for the province to make its public revenue less oil-dependent. Since oil is a “non-renewable resource” that can only be sold once, goes the theory, the province’s share shouldn’t be used to meet ongoing government expenses; the worthy thing to do is to set it aside and invest it.

I find aspects of this argument amusing. In the early ’70s everyone agreed that Alberta’s “non-renewable” conventional oil would be gone in a decade or so. Yet the trend was for the amount remaining to keep getting larger. Meanwhile, how’s Newfoundland making out with its hypothetically “renewable” cod biz? Continue…