Alberta's oil economy forced to 'recalibrate': economist

Low oil prices took a toll on the Alberta economy in the latter half of 2015. But the price of crude is forcing a "recalibration" which will better prepare the province's petroleum sector for when oil prices eventually rebound, says one economist.

See Full Article

Low oil prices have resulted in mass layoffs in the oilpatch.

In July, 2014, a barrel of crude was priced at just over US$100 a barrel. It now sits below US$40.

The latest data shows that the province's unemployment rate in November, 2015, was 7.0 per cent, an increase of 2.6 per cent from November, 2014.

Todd Hirsch, chief economist at ATB Financial, said that, while the province's policy makers have had some success in diversifying Alberta's economy in the last 30 to 40 years, it is still primarily driven by the oil industry.

"We're reminded one more time that we are still very much a boom-and-bust economy, and very much beholden to where these energy prices go," he told CTV's Canada AM from Calgary. "That petroleum sector is the dog that wags an awful lot of tails."

And when the petroleum industry takes a hit, it has an inevitable ripple effect in other industries, including retail, housing and financial services, he added.

But Hirsch said there could be a potential silver lining that comes amid the economic uncertainty of low oil prices.

Once the price of oil rebounds to between US$55 and US$60 a barrel, the industry will be "healthier," he said, noting that, over the last 10 years, the price of oil rose from about US$42 a barrel to more than US$100 a barrel.

In the meantime, Hirsch said the province's economy will continue to "recalibrate itself," resulting in layoffs and decreased spending.

"All of that is recalibrating downwards, and that is painful to see," he said. "But that will actually help position the petroleum sector to something healthier, so that when oil prices rebound, to perhaps $55 or $60 a barrel, perhaps by the end of 2016, the industry will once again be profitable and stabilize."

Last month, OPEC released its annual World Oil Outlook, forecasting a slow rebound for oil prices.

In the report, OPEC said it expects oil prices to climb to US$70 a barrel in 2020, and US$95 a barrel by 2070.



Advertisements

Latest Economic News

  • Unifor says it has left Canadian Labour Congress over dispute

    Economic CBC News
    ?Unifor, the largest private sector union in Canada, says it is splitting with the Canadian Labour Congress over disagreements about the rights of workers to choose which union should represent them. In a letter to the CLC, Unifor national president Jerry Dias and Quebec director Renaud Gagne say the congress has been less than supportive of its concern about American-based unions "trampling on the rights" of workers and their right to choose representation or express dissent. Source
  • Bread price-fixing documents won't be unsealed Thursday, Loblaw says

    Economic CTV News
    BRAMPTON, Ont. -- Loblaw says court documents regarding an alleged industry-wide bread price-fixing scheme won't be released tomorrow after an unidentified individual filed an application against releasing them. The information to obtain, which outlines why the Competition Bureau wanted search warrants in the case against at least seven companies, including Canada's three major grocers, has been sealed for 30 days and was scheduled to be released Thursday morning. Source
  • Home Capital vows to defend itself against short seller's $4M lawsuit

    Economic CTV News
    TORONTO -- Home Capital Group (TSX:HCG) says it vows to defend itself against misrepresentation claims in a $4-million lawsuit filed by a short seller against the alternative lender and three of its former executives. The company issued a response after California-based short seller Marc Cohodes on Monday filed a statement of claim with the Ontario Superior Court of Justice, alleging that the company's misrepresentations in its financial reporting cost him millions when he closed his position…
  • Home Capital vows to defend itself against short seller's lawsuit

    Economic CBC News
    Home Capital Group days it vows to defend itself against misrepresentation claims in a $4-million lawsuit filed by a short seller against the alternative lender and three of its former executives. The company issued a response after California-based short seller Marc Cohodes on Monday filed a statement of claim with the Ontario Superior Court of Justice, alleging that the company's misrepresentations in its financial reporting cost him millions when he closed his position early. Source
  • Canada's new distillery district? Nova Scotia sees explosion in craft spirits

    Economic CTV News
    HALIFAX -- Nova Scotia has kindled an explosion of spirit makers -- there are now 16 in Canada's second-smallest province -- through attractive craft-distillery policies and collaborations with local farmers. The Nova Scotia Liquor Corporation says 12 of those distilleries have popped up in the last five years, serving rum, gin, vodka and other spirits. Source
  • Loblaw, CRA face off in court in dispute that could cost grocery giant $404M

    Economic CTV News
    TORONTO -- Loblaw Companies Ltd. and the Canada Revenue Agency faced off in a Toronto court Wednesday in a $404-million dispute involving allegations that the grocery giant's Barbadian banking subsidiary was misused for tax avoidance. Source
  • Fed survey finds solid U.S. growth and rising wages

    Economic CTV News
    WASHINGTON -- The Federal Reserve reported Wednesday that the economy was growing at a moderate pace at the start of the year, with the majority of business contacts optimistic about prospects for 2018. In its latest survey of business conditions nationwide, the Fed said that wages were rising at a modest pace. Source
  • Bombardier won't confirm pending order in Iran for 10 regional jets

    Economic CTV News
    MONTREAL -- Bombardier Inc. will not confirm a published report in Iran that the Canadian planemaker is finalizing its first commercial aircraft order in the Middle Eastern country. The Quebec-based company has acknowledged in the past that it was exploring opportunities in Iran. Source
  • Royal Bank raises prime lending rate to 3.45% in wake of Bank of Canada decision

    Economic CTV News
    TORONTO -- The Royal Bank of Canada (TSX:RY) is raising its prime lending rate by a quarter of a percentage point in the wake of the Bank of Canada's decision to raise its key interest rate target. Source
  • Canadian banks raise prime lending rate to 3.45% in wake of Bank of Canada move

    Economic CTV News
    TORONTO -- Canada's biggest banks will hike their prime rate by a quarter of a percentage point on Thursday, putting financial pressure on homeowners with variable rate mortgages. The Royal Bank of Canada (TSX:RY) was first to announce its prime rate will rise to 3.45 per cent, shortly after the Bank of Canada raised its key short-term rate by a quarter-point to 1.25 per cent. Source