Drastically lower oil prices “will most likely” lead to recession in Alberta, the country’s richest province and the heart of Canada’s oil sands industry, according to a Conference Board of Canada report.
Several economists have cut their growth expectations in recent months as the price of a barrel of oil has plummeted from US$105 as recently as June last year to under $45 today. But in its report the board goes further and says the province faces more than just a slowdown — it could see an actual recession.
"Going forward, the province is certain to suffer, especially on the employment front, from the drop in oil prices — and it is likely to slip into recession," Daniel Fields, an economist at the non-profit research organization, said in the document.
The first effects of the gloomy trend have already started to pop up. Yesterday, Canadian Natural Resources (TSX:CNQ), the country's largest independent oil producer, became January 12 the first main domestic energy firm to slash its 2015 budget by $2.4 billion or about 30% as a result of plunging oil prices.
As a consequence, the Calgary-based oil and gas company announced it was deferring the first phase of the 40,000-barrel-per-day project in northern Alberta, originally targeted for the fourth quarter of 2016, until prices for crude — the province main export— stabilize.
On January 13, Suncor announced it was slashing $1 billion in capital spending and 1,000 jobs.
The board predictions are scary: “When prices dropped to such low levels during the last recession, engineering investment in the province nosedived by about $18 billion, some 30,000 jobs in Alberta’s mining sector disappeared, and housing starts fell by 75%,” the report warns.
Tailing ponds issue
Meanwhile, several reports on Monday revealed that Canada is trying to stop NAFTA's environmental watchdog from taking a closer look at the environmental effects of Alberta’s oil sands tailing ponds.
Trade partners Mexico and the U.S. are expected to back up the country’s attempts to stop a formal investigation.
If they succeed, Global National reported, it would be the third time in a year Ottawa has blocked North American Free Trade Agreement scrutiny of its environmental record.
