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How $40 oil would impact Canada’s provinces

 

What does Canada’s economy look like with oil prices at $40 a barrel? Certainly it won’t be the energy superpower envisioned by Prime Minister Stephen Harper.

 

If $40 a barrel still seems a ways off, consider that the benchmark price for oil sands crude is already trading in that price range. What’s more, if production from high-cost sources isn’t withdrawn from an oversupplied market, oil prices may soon be trading even lower.

 

The first thing Canadians should recognize about the new world order for oil prices is that – contrary to what we’re being told by our federal government – the economy is no longer in dire need of any new pipelines. For that matter, it can live without the new rail terminals being built to move oil as well. Yesterday’s transportation bottlenecks aren’t relevant in today’s marketplace.

 

At current prices there won’t be any massive expansion of oil sands production because those projects, which would produce some of the world’s most expensive crude, no longer make economic sense.

 

The recent spate of project cancellations by global oil giants – Total’s Joslyn mine, Shell’s at Pierre River, and Statoil’s Corner oil sands venture – is only the beginning. As oil prices grind lower, we can expect to hear about tens of billions of dollars of proposed spending that will be cancelled or indefinitely postponed.

 

Not long ago, the grand vision for the oil sands saw production doubling over the next 20 years. Now that dream is in the rear-view mirror. Rather than expanding production, the industry’s new economic imperative will be attempting to cut costs in a bid to maintain current output.

 

With the exception of oil sands players themselves, no one will feel those project cancellations more acutely than new Alberta Premier Jim Prentice. His province’s budget is beholden to the gusher of bitumen royalties that will no longer be accruing as planned. He could choose to stay the course on spending, as former Premier Don Getty did when oil prices plunged in the 1980s, in hopes that a price recovery will materialize. That option, as Getty discovered, would soon see Alberta’s budget surplus morph into spiralling deficits. The province’s balance sheet wasn’t cleaned up until the axe-wielding Ralph Klein took over. In his first term, Klein slashed spending on social services by 30 per cent, cut the education budget by 16 per cent and lowered health care expenditures by nearly 20 per cent.

 

Of course, falling oil prices are a concern for much more than just Alberta’s budget position. Real estate values also face more risk, particularly downtown Calgary office space. For oil sands operators, staying alive in a low price environment won’t just mean cancelling expansion plans and cutting jobs in the field. Head office positions are also destined for the chopping block, which is bad news for the shiny new towers going up in Calgary’s commercial core.

 

If plunging oil prices are writing a boom-to-bust story in provinces such as Alberta, Saskatchewan and Newfoundland, the narrative will be much different in other parts of the country.

 

Ontario’s long-depressed economy is already beginning to find a second wind, recently leading the country in economic growth. And the engine is just beginning to rev up. As the largest oil-consuming province in the country, lower oil prices put more money back into the pockets of Ontarians, while also juicing the buying power of its most important trading partner. Ontario’s trade leverage with the U.S. is set to become even more meaningful as the Canadian dollar continues to slide along with the country’s rapidly fading oil prospects.

 

Just as the oil sands boom turned Canada’s currency into a petrodollar, pushing it above parity with the greenback, the loonie is already tumbling in the wake of lower oil prices. And it shouldn’t expect any help from the Bank of Canada, which continues to signal that it’s willing to live with a much lower exchange rate in the face of a strengthening U.S. dollar.

 

A loonie at 75 cents means GM and Ford may once again consider Ontario an attractive place to make cars and trucks. Even if they don’t, you can bet others will. With the loonie’s value falling to three quarters of where it was only a few years ago, we’ll start seeing Ontario, as well as other regions of the country, start to regain some of the hundreds of thousands of manufacturing jobs that were lost in the last decade amid a severely overvalued currency.

 

For the Canadian economy as a whole, much is about to change, while much will also remain the same. Once again, oil will largely define the fault lines that separate the haves from the have-nots (or at least the growing from the stagnating). But at $40 oil, it’s the consuming provinces that will drive economic growth. Rather than oil flowing east through new pipelines, jobs and investment will be heading in that direction instead.

 

http://www.theglobeandmail.com/report-on-business/industry-news/energy-and-resources/how-40-oil-would-impact-canadas-provinces/article22288570/

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Alberta faces $500 million deficit with falling oil prices: Prentice

 

EDMONTON -- Alberta Premier Jim Prentice says oil prices have plunged so far so fast that this year's projected budget surplus will now be a $500-million deficit.

 

And he says while his advisers expect oil to rebound slowly over the coming years, the budget may remain in deficit until 2018.

 

"It's the most serious fiscal circumstance we've seen in a generation in this province," Prentice said in an interview Thursday.

 

"Things have turned so dramatically that we've gone from a $1.5-billion surplus in November to what looks like a $500-million deficit based on today's projections.

"And there's actually precious little we can do about that. We've been belt-tightening in government for the last quarter."

 

Oil prices, the lifeblood of Alberta's economy, have been in free fall since last summer, tumbling from US$100 a barrel to below US$50 a barrel this week.

 

"It's like landing a 747 and you're coming in on the runway. We're in the last two months of the fiscal year. You can't either increase your revenue or decrease your expenses in any meaningful way," said Prentice.

 

The province predicted a barrel of West Texas Intermediate would average $92 a barrel this fiscal year ending March 31. That was revised to almost $89 in November as prices fell.

 

Each $1 drop in the average price over the course of a year costs the province $215 million.

 

Prentice said that in next year's budget the plan right now is to budget for oil at $65 a barrel, but he said that would still mean a $6.7-billion drop in projected resource revenue.

 

He said the forecast average price for the 2016-17 year will be $75 a barrel, which would still leave a $4.9 billion deficit.

 

"The third year we should start to return to a balanced budget," he said.

The problem, he added, will be if oil prices remain below the $50 a barrel mark for the long-term.

 

"If oil prices persist at sub-$50 per barrel, we essentially have no oil revenue, and it opens up a revenue hole in Alberta's finances that approaches $10 billion," he said.

The premier said they are now looking at a combination of three options: reducing expenditures, increasing revenue, and dipping into the $5-billion contingency fund.

He said they'll use the contingency fund to cover off this year's deficit but otherwise everything is on the table.

 

Prentice declined to be more specific on the types of cuts or revenue generation plans being considered.

 

In past weeks, he has said he won't impose a sales tax but has refused to rule out hiking corporate or income taxes or making changes to the tax structure.

He has also said the province needs more fundamental economic changes so that day-to-day spending is not hostage to swings in oil prices.

This year's budget also forecasts the debt for capital projects to reach more than $11 billion.

 

Prentice said the latest numbers were crunched with the aid of an ad hoc team of cabinet ministers struck before the Christmas break.

 

The committee, along with Prentice, is comprised of: Finance Minister Robin Campbell, Health Minister Stephen Mandel, Municipal Affairs Minister Diana McQueen, Energy Minister Frank Oberle, Infrastructure Minister Manmeet Bhullar, and Jobs Minister Ric McIver.

 

 

Read more: http://www.ctvnews.ca/canada/alberta-faces-500-million-deficit-with-falling-oil-prices-prentice-1.2180037#ixzz3OIL4JijZ

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Tout un revirement de situation. Ça démontre la vulnérabilité de l'économie albertaine. Ils sont totalement dépendants d'un seul secteur.

 

À l'opposé, le Québec peut vivre la baisse du minerai de fer ou de l'or sans de gros dommages, malgré que nous en exportons pour des milliards chaque année.

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Alberta recession likely in 2015, Conference Board of Canada says

 

Alberta is “most likely” headed for a recession in 2015, if the price of oil continues its steady decline, says the head of the Conference Board of Canada.

Board chief economist Glen Hodgson said Monday, although key economic indicators such as employment and new housing starts have remained steady, Alberta will be headed for a recession even if oil prices rebound to about $65 a barrel.

 

Oil closed down $2.29 to US$46.07 on Monday.

 

Alberta is 'most likely' headed for a recession in 2015, if the price of oil continues its steady decline, says the head of the Conference Board of Canada.

“The most likely outcome we think for Alberta this year is a recession,” Hodgson told CTV Calgary.

 

“That’s not good for Alberta, (and) it’s also not great for the national economy. It means job loss (and) lower levels of investment across the country.”

On Monday, Calgary-based Canadian Natural Resources Limited became the latest resource company to announce it will rein in spending in 2015. The company says it will spend $2 billion less this year than it had forecast back in November.

 

Cenovus and Husky Energy are just two other resource companies that announced cuts to their capital budgets in recent weeks.

Alberta Finance Minister Robin Campbell, however, disputes claims that the province is headed for a recession.

 

Campbell told CTV that, “while growth is going to be a down a bit in Alberta, no one is talking about a recession right now.”

Resource companies say that the true impact of falling oil prices will be seen when the next drilling season gets underway in late summer.

 

“If the programs don’t come back into play for summer, as we typically ramp up to a certain degree, that’s when we’re going to sense it,” said Mark Salked of the Petroleum Services Association of Canada.

 

“That’s when the writing will be on the wall.”

 

CTV Calgary’s Lea Williams-Doherty

 

 

Read more: http://www.ctvnews.ca/business/alberta-recession-likely-in-2015-conference-board-of-canada-says-1.2186042#ixzz3OituOZB9

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It is hard to see what will happen within the next year. I am not sure how viable the oil sands will be in the future, if all the producers don't find a way to lower the cost of getting it out of the ground. The reason I am saying that, a few people are speculating that a barrel of oil, will never go above US$100 ever again which is alright. I think I saw that Alberta needs it to be above $85 to breakeven. I guess time will tell, one thing is for sure we will be seeing layoffs soon. WTI crude is below $45 now and months ago, people kept saying it may settle at around $40, but I told them the way it was going it may be $31 (but I'll see if I will be right).

 

Canada will be taking a hit and I am not sure how the Conservatives will be able to balance the budget, with this type of loss and I have a feeling this may tip it in favour for the Liberals in the election slated for October.

Edited by jesseps
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via Radio-Canada

 

Le prix des maisons lié à la chute du prix du pétrole, selon Royal LePage

 

Mise à jour il y a 26 minutes

 

Deux études de la firme Royal LePage sur le marché de l'immobilier au Canada prévoient que la chute récente du prix du baril de pétrole brut aura une incidence sur les principaux marchés canadiens.

 

L'Étude sur le prix des maisons et l'Étude sur les prévisions du marché, diffusées aujourd'hui, prévoient notamment que le ralentissement de l'augmentation du prix des maisons sera retardé dans le centre du Canada et accéléré dans l'Ouest par les récents développements dans le secteur énergétique.

 

Royal LePage souligne que la santé du marché immobilier canadien demeure menacée, notamment par des hausses des taux d'intérêt, davantage d'intervention du gouvernement fédéral sur le marché immobilier ou une culbute soudaine de l'économie nord-américaine. Même s'il est peu probable que ces facteurs se mettent en place en 2015, la plus grande menace pour le marché immobilier réside dans la perte de confiance des consommateurs.

 

Au quatrième trimestre de 2014, le prix moyen des propriétés au Canada a enregistré des gains par rapport à l'an dernier sur la plupart des marchés. Le prix moyen des habitations a augmenté de 4,5 % à 6,7 %.

 

Le prix moyen d'une maison individuelle de plain-pied s'est hissé à 406 218 $ (en hausse de 6,7 %), celui d'une maison standard à deux étages, à 443 379 $ (en hausse de 6 %), et celui d'un appartement en copropriété standard, à 257 624 $ (en hausse de 4,5 %).

 

Royal LePage prévoit que le prix des maisons augmentera de façon modérée en 2015, soit de 2,9 % à l'échelle nationale.

 

Le marché a été relativement stable à Montréal au quatrième trimestre. Le prix moyen des maisons individuelles de plain-pied a augmenté de 2,1 % en un an, pour atteindre 297 300 $. Le prix des appartements en copropriété standards a grimpé de 1,1 % pour atteindre 241 983 $. Et le prix des maisons standards à deux étages est demeuré stable, avec une maigre augmentation de 0,2 %, pour s'établir à 402 321 $.

 

Cette très légère hausse des prix à Montréal s'explique par une augmentation du nombre de maisons à vendre et par une multiplication des nouvelles mises en chantier dans la grande région de Montréal. Selon Royal LePage, les mesures d'austérité adoptées par le gouvernement Couillard pèsent également sur le marché de l'immobilier. La firme s'attend à ce que les prix des propriétés augmentent légèrement en 2015 dans la région métropolitaine, de 0,6 %, mais que les ventes baissent de près de 2,5 %.

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