In 2014 the Alberta economy began to turn downwards. Oil and Gas prices were on the verge of sliding and would fall at one time to $53.45 USD a barrel. This was a sign of things to come! Oil would fall to a low of $26.19 USD a barrel in 2016. Alberta oil prices would limp along for the next five years. Many Albertans would feel uneasy about the “oil patch” as it still was and continues to be a major provider of GDP to the Alberta economy. It no doubt played upon the thoughts of then Premier Jim Prentiss and his replacement Rachel Notley. The time would also usher in the beginning of political instability in Alberta where in the last 10 years Alberta has had six Premiers.
Economic Analysis
Alberta oil and gas have seen a rebound. The war in the Ukraine is responsible for the rebound. World markets affect Alberta oil and gas prices. World events in turn affect world markets. While energy supplies reorganize, oil and gas prices increase. No doubt many in the UCP breathed a sigh of relief because maybe the Alberta economy would rebound at least until after the provincial general election expected to occur in May of this year. That gives the UCP a boost to retain the government. However the economic issues left over after the worst of the Pandemic still are affecting our economy. There is nothing given in Alberta economy and politics.
Therefore I see the possibility of one three following scenarios as being the most possible:
- We have a deep recession and inflation begins to fall to below 6%
- We have a mild recession and inflation stabilizes at 6%
- We have a mild recession and inflation drops below 6%
First I think it’s important to list the five most important industries contribution to Alberta’s Gross Domestic Product (GDP). These are (for the year 2021):
- Oil, Gas and Mining – 21.83%
- Real Estate, Renting & Leasing – 11.53%
- Construction – 7.91%
- Manufacturing – 7.66%
- Health Care – 6.68%
These five sectors provide 55.61% of Alberta’s GDP and the other 15 sectors provide 44.39%. As the provincial governments of the last 10 years has re-discovered oil and gas can greatly affect the economy of Alberta and the fortunes of the government. In the 1980’s the decline of oil and gas hurt Alberta badly and it took 10 years to recover from this. The downturn in 2015 was less harmful but it still had an affect on Alberta.
North America is awash with both oil and gas. The US is developing shale oil and recovery costs are declining. Canada is still developing oil sands and recovery costs are as low as they will be unless technology changes this. Natural gas is pretty much the same. Conventional natural gas is a matter of statistical drilling. Improved fracking technologies benefit non-conventional natural gas production. Shale oil and gas recovery also use fracking technology.
Alberta wins from any uncertainty in the global energy market, which keeps price of oil and gas above the cost of production. Of course this also depends upon OPEC and OPEC+ countries that influence prices by adding or subtracting production. However as we have discovered war can change things greatly and the world’s major supplies are where our “enemies” exist and can with determination reduce OPEC’s ability to influence supply. It is not hard to see that the future of energy will rise or fall depending on the global energy market. This will no doubt mean a roller coaster ride for the Alberta economy.
This year will see the Alberta economy stay the same. Oil and gas prices have declined however the “oil patch” is running leaner. Royalty payments to the provincial government will decline and may cause a deficit. Right now there is a surplus. As previously mentioned a lot will depend on the global energy market. However I will say the years of predictability are over and the next 20 years will see times of “feast or famine”.
For average Albertans I see the possibility of two more increases in the Bank of Canada Prime Rate of .25% each. I see the BOC being less aggressive with interest rates, but will still try to push inflation down. This will bring the rate to up to 4.75%. The economy will sink into a recession, less painful in Alberta and harder elsewhere. Food prices will stay high in 2023. There is a variety of reasons for this, transportation cost, supply chains, droughts and a host of other reasons. We don’t need crystal balls to predict the economy. We need to get used to inflation being at or around 6% for the next year. I believe the years of living cheap are over! Get used of spending more and getting less. Next Part – Alberta Sociology