Piff Poff

OH was talking to a hot shot buddy today, he's got the willies about the current situation as he's a relatively new business, he ca see it all going pear shaped.

Steve_

I think it is going pear-shaped.

The current price of Alberta heavy crude is below the production price, so that basically means govt. royalties from the oil sands drops to nil. And that isn't just a problem for Alberta. So it's going to be belt tightening and the province going heavily into debt and if things don't improve markedly by the end of the year, massive tax increases.

The problem isn't just about the price of oil, this is the point. Since 2009 the US has massively increased domestic oil production and they've just scrapped the export ban so basically - they don't need to buy Canadian oil.

And that is the real problem right there, going forward. So TransCanada is trying to build pipelines all over the place in order to ship the stuff elsewhere, but not many refineries can upgrade Alberta heavy crude.

The only bright spot is that Keystone XL might get approved now after the Nebraska Supreme Court decision, so the crude can be shipped cheaply to Texas, refined, then exported.

Even if demand goes up though, the US increase in production stuffs Canada.

Time to diversify the economy, finally.

cbrown89

Obama will veto the keystone so wont be any time soon I believe.
Dont know too much about shale oil but I don't think the lifetime of the industry is very long.
Canada is a closed market and I can't see that changing anytime soon, too many provinces to go through, too many people to please and more importantly pay.
How economical is it to ship from Alberta - East coast to refine and send on a vessel to Europe?

Shell are laying off 150-300 people today, Focus engineering 50-100 a few days ago.... MEG energy will be in big trouble but a lot of other large operators hedged their rates for this year at least part of it.

Are you in O&G Steve, if so how are you finding it?

Steve_

He said he will veto the bill, but wants the State Dept. to review the Nebraska ruling then he will "come to a decision".

It's clearly the future of oil production in the US, the growth in production is huge.

Not directly but it affects everything in Alberta. And Canada, for that matter.

dishwashing

What is it with poor governments?

Reckon it's true with the old saying people get the government they deserve?

ACK

Oakvillian

So Alberta needs to sort out a properly equitable tax system? My heart bleeds.

The fall in oil prices is good for the world economy. The inability of frackers and other marginal producers to make any money, and will be forced out of business, is good for the environment. The fall in the Canadian dollar is great for Canadian manufacturers and exporters. The fall in price of fuel is good for consumers.

It's about time Alberta got a taste of what it has been dishing out to Ontario for years. Bleat on, Albertans: the rest of Canada's not listening.*

*with the possible exception of NL, and apologies to AX...

cbrown89

Canadian economy is massively linked to oil, the TSX is taking a pounding with oil and the loonie practically going hand in hand.

Cheap fuel may be great but with the loonie sinking I can't understand how that makes imports better for consumers.

Shard

It boosts exports, so the Eastern economies benefit.

scrubbedexpat091

Good for exporters, but bad for importers isn't it?

I don't see the consumer benefiting other then cheaper gas where the savings can be used to cover the increases in food and other goods that are becoming more expensive to import, thinking produce and other food stuffs imported from the US.

A poor loonie also makes it hard for Canadians to travel outside of Canada since the cost becomes excessive, but good for tourists coming to Canada as their trips become cheaper.

Like anything some people lose, and some gain, the consumer will lose in the long run I think.

Shard

Travel and imports are more expensive, but generally a lower currency will lead to a bigger stronger economy. More jobs, more wealth. Less foreign ownership.

Oakvillian

Why is it a bad thing that the dollar is at a more sensible level? It was never supportable long-term at or above par with the Greenback. I don't agree with your premise at all. Sure, the Alberta economy is massively linked to oil. The stock exchanges are dominated by resource companies, many of which are active in oil. But the economy of Ontario, for example, is (despite the Federal government's neglect of the sector) still dominated by manufacturing (largely for export) and by financial services. A weaker dollar, low oil prices and a resurgent US economy are all good for manufacturers and exporters. Financial services markets are effected in many ways by the lower dollar; sure, some of the big resource companies are reeling, and if too many go to the wall their lenders will hurt a bit for a while, but the net benefits of a growing US economy and a weak dollar heavily outweigh any disadvantages of a slump in energy prices.

It's unfortunate that successive provincial governments in Alberta have relied too heavily on oil revenues, instead of putting in place a sustainable taxation system. Absolutely that means that the province will find itself short of revenue in the short term. There is maybe an opportunity now in the Edmonton legislature for fiscal reform (although I won't hold my breath...)

scrubbedexpat091

Makes sense. I am a bit selfish and a weak dollar means no travel, so I can't say I am all too happy about it. But again it's for personal reasons. If it ever drops back into the 60 cent range, I'll have to go find a job paid in USD...lol

I worry mostly about food since so much is imported, and it's already pricey to begin with.

Almost Canadian

How are the government's coffers in Ontario looking?

Steve_

Ontario will suffer more than Alberta and NL, it's a net receiver of transfer payments - and those payments come from out west. And Ontario is already massively in debt. Low oil prices affect the whole country, not just the oil producing provinces.

Oakvillian

Not tremendously healthy, but then again, not dependent on oil revenues. The government here is holding to its forecast of zero deficit by 2017-18, although servicing government debt is still costing the province way too much and the debt-to-GDP ratio is still way too high.
Ontario has been a net receiver of transfer payments since 2009-10; that is not entirely disconnected to the Federal government's pursuit of natural resource exploitation at the expense of manufacturing, and the asymmetric effect that policy has had on provincial economies. I would be unsusprised if Ontario were to return to the "haves" list in the next year or so, especially if the loonie stays at a sensible level and oilsands production remains marginally viable.