A high-stakes game of chicken is probably a fairly accurate assessment. There is little doubt among analysts that oil will eventually go higher. Some now think it might taken until 2011 before the recession is fully worked through, and oil starts to rise. The ultra-conservatives will say that it is safe to assume that maybe oil won't rise until 2015, once third-world demand has had several years to catch up to western economies. But no matter what, the supply/demand curve for oil will become constrained eventually, and oil will go up. So under that logic, even though the royalties may be bad business now, it is pretty certain that for the long term, it is the right decision for Albertan politicians to keep the royalties in place.

However, if they were a bit more far-sighted, they could mitigate the current situation. They don't want to cancel the royalties, because if they did, it would be much harder to re-implement them five years down the road. The smart thing would be to say, "We are keeping the royalties in place, but in light of the current global economic recession, we are extending the implementation period by three years, to give companies a chance to get back on their feet."

But I hold little hope that this could happen.