Oil prices could push Alberta into recession: think tank
Oil sands expansion halted, and a new Alberta sales tax proposed to stem economic pain
Oil rich Alberta — once the crown economic jewel credited with saving Canada from the worst of recent recessions — may soon be facing a hard recession of its own.
The province is expected to suffer the worst economic shock in the country due to declining oil prices says the Conference Board of Canada.
The think tanks says the economic pain will be felt coast to coast, but no more so than in wild rose country.
"Not surprisingly, Alberta will experience the largest drop in real GDP as it is by far Canada’s largest oil producer. In fact, the province could slip into recession in 2015,” said the Board in a statement Tuesday.
The oil price — now at a five-year low — will erase $4.5 billion in oil royalty revenues, mostly in Alberta, but also Saskatchewan and Newfoundland. A further $12 billion in business investment will also go up in smoke in Alberta in 2015, the report suggested.
As a sign of how much the fiscal bleeding has hurt Alberta, Premier Jim Prentice is talking openly about something ordinarily unthinkable for his province: a sales tax.
“I don’t think Albertans generally advocate a sales tax, but I’m prepared to be educated and to hear from people,” Prentice told reporters recently, according to Canadian Press.
Environmental author Naomi Klein, who spoke with the Vancouver Observer recently, saw this coming.
“I was in Alberta when the price of oil dropped. This has made them extremely vulnerable in the same way that Christy Clark’s reliance on LNG has made BC very economically vulnerable."
"That very seductive promise of easy money has a flip side -- these are volatile industries. Not only are we breaking international commitments, but we are also damaging our economy in many ways,” Klein said.
Oil sands expansion on hold
Oil companies are now shutting down many of their long-term capital projects to expand the oil sands.
Suncor, for example, announced it will chop 1,000 workers from its payroll. It has 6,300 workers it has in the oil sands. The company is now shelving plans for its MacKay River oil sands project in northeastern Alberta.
Shell Oil will also trim 300 workers.
Liberal leader Justin Trudeau seized upon the coming economic slow down.
“So, first question: why would the Harper government bet so much of Canada’s future on oil prices staying high? Because they didn’t. They hardly do."
"Second question, and the big one: Why didn’t the Harper government have a more balanced plan?” asked Trudeau in London, ON, according to many news reports.
Prime Minister Stephen Harper meanwhile remains hopeful oil prices will bound back:
“As rapid a negative a change that this is for the industry, the industry, even in my lifetime, has lived through changes this extreme and more on many occasions,” Harper told reporters in B.C. on Jan.8, according to Reuters.