The commodity rich Canadian province of Alberta, whose oil sands are the world’s third-largest crude reserve, will be looking for some relief from low domestic oil prices in Tuesday’s Federal Budget, seeking dollars for its crude-by-rail plans and maybe even some relief for citizens whose pocketbooks are being stressed by the downturn in the oil industry.
The province of 4.3 million, which had become used to heady economic times prior to the oil price crash that started around 2014-15, has seen big drops in a host of key economic indicators, not least since domestic oil prices plunged again near the end of last year, to as much as $50 below the U.S. benchmark. According to the most recent data, motor vehicle sales were down 13.1% in from January, 2018, housing starts were down 18.3%, exports fell 4.5% and building permits fell 7%.
The long list of bad economic news stalled the province’s backbone industry, and with pipelines full, the province was forced to mandate a 325,000 barrel per day production cut in January.
Alberta Premier Rachel Notley in December announced her government would spend $3.7 billion to acquire 4,400 rail tanker cars in order to raise export volumes of crude oil to U.S. markets and boost oil prices, since royalties from oil producers are the largest financial contributor to the province. Notley said she would welcome a federal move to pick up part of the tab and Ottawa has yet to rule out taking a stake in the plan.
Indeed, federal natural resources minister Amarjeet Sohi told the Calgary Herald last week that his government may consider making a contribution from an existing $700 million infrastructure fund. “We can potentially fund some projects that will make the (rail) network more efficient and also help with the movement of other commodities,” he told the paper.
But other measures could also provide some help. Calgary, which had boomed as the financial center of the country’s oil industry, posted a 7.6% unemployment rate in February, the highest of 33 metropolitan areas monitored by Statistics Canada. Also, the price of single-family homes in the city have dropped 13% over the past year, leading opposition politicians in the province to call on the federal government to ease recently introduced mortgage restrictions in order to boost the real estate market. While its unsure if the federal Liberals are entertaining such a move, such steps would offer a bit of economic cheer to a pessimistic province.
Indeed, a poll released on Monday by Angus Reid reported 46% of Albertans said they felt their standard of living has fallen over the past 12 months. Though budget tidbits could help, few are expecting the economic picture to improve until oil prices recover.