Boomtown no more: How Alberta’s economy has turned around despite skyrocketing oil prices – Canada News

Boomtown no more: How Alberta’s economy has turned around despite skyrocketing oil prices – Canada News

Boomtown no more: How Alberta’s economy has turned around despite skyrocketing oil prices – Canada News

To take the temperature of the local economy, Lloydminster Mayor Gerald Aalbers has only to look out the window.

From his office at City Hall, Aalbers – with Lloydminster straddling the Alberta-Saskatchewan border, has the unique distinction of serving residents of both provinces – has a direct line of sight to Highway 16. The highway is an important east-west corridor. heavy transport trucks and half tons on their way to the oil fields that dot the surrounding region.

But despite a sharp rise in crude prices in 2022 (they hit $120 a barrel earlier in the year before falling to the mid-$80 range this fall), and despite record earnings and all-time high production levels for Canadian oil companies. , traffic volume on the highway has only increased moderately, Aalbers said.

“We’re seeing earlier morning traffic and a little more traffic around the city,” Aalbers said.

“That’s good because it means wells are being drilled. It reflects some general optimism in the industry,” he added. “So I think we’re gaining some speed, but we’re not accelerating by any means yet.”

“Not accelerating yet” might be the perfect way to describe the strange economic reality Canada’s oil country finds itself in 2022.

While the industry itself is doing better than it has in nearly a decade, with energy prices higher than they have been in years, experts say any economic boom that has affected the surrounding region is notably missing.

“If I said two years ago that Alberta would see record oil revenues … you would have expected Calgary and Edmonton to boom, and so would the rest of the province. And it’s not happening,” he said. Charles St-Arnaud, chief economist at Alberta Central, the province’s central banking facility for credit unions.

In 2014, for example, the last time oil prices soared, many communities in Alberta and to a lesser extent Saskatchewan felt like gold rush towns. Hotel rooms were full, local bars were filled with money and pride from oilfield workers, and people from all over the country headed west for work.

But St-Arnaud, recently “Where’s the Boom?” published a report called He said that many things are different this time.

The industry itself is doing very well: Alberta’s total oil production hit a record in the first half of 2022, averaging 3.6 million barrels per day.

And thanks to high commodity prices, the total value of the province’s oil production between August 2021 and August 2022 was $140 billion, up 75 percent from the same period in 2014. In the first six months of this year, Canada’s four largest oil sands producers alone posted profits of more than $21 trillion, more than triple their profits in the same period last year.

But after nearly a decade of falling oil prices, producers are under pressure to focus their extraordinary profits in 2022 on debt repayments and shareholder returns, rather than investing in their operations.

In 2022, oil producers reinvested only about 7% of revenue in their operations, compared with 25% in 2014, St-Arnaud said. The nature of these investments has also changed, as companies abandon capital-intensive projects in favor of smaller projects aimed at boosting production, improving efficiency or reducing greenhouse gas emissions.

As a result, there are fewer workers and less economic impact. According to Statistics Canada, total employment in Alberta’s oil and gas sector is only 75 per cent of what it was in 2014, and employment in construction, a spin-off sector, is only 80 per cent of what it was then.

Also, oil wages no longer challenge other sectors the way they once did, St-Arnaud said.

“To attract workers you don’t have to offer high wages, because you don’t need that many workers,” he said. “One of the things I’ve noticed is that wages in Alberta have been consistently about 10 per cent higher than the rest of Canada since the late 2000s. But the gap has started to narrow in recent years.”

Duane Sulyma, a rigger who has worked everywhere from Grande Prairie to Rocky Mountain House, Alta. He told Lloydminster and now Kindersley, Sask., that oilfield work isn’t as profitable as it once was, and workers are feeling a bit of inflation.

“When I started in 2012, it was wild. I bought a new house, I bought a truck, I bought everything I wanted,” Sulyma said. “But the numbers don’t add up anymore, and the cost of living has gone through the roof.”

After the last eight years of low commodity prices and then the COVID-19 pandemic, many former oilfield workers have had enough of the volatility and have chosen to leave the oil and gas industry altogether.

“No one who has a job in the town wants to come out here, work for a year, get fired and then have to fight to find another town job,” Sulyma said.

St-Arnaud is convinced that the oil industry has changed forever. And while this may bring downsides, Alberta’s economy will likely be less sensitive to oil prices going forward.

“That’s the thing, if it’s not a boom, the disruption will be less,” he said. “It’s not that oil is no longer positive for our economy, it’s just not as positive.”

That’s not necessarily a bad thing, said Sandy Bowman, mayor of the rural town of Wood Buffalo, which includes the oil sands community of Fort McMurray.

As Canada’s most popular uptown, Fort McMurray struggled in 2010-2014 to keep up with demand for housing, roads and other infrastructure as workers from across the country flooded into the community.

“What you want to see is strong and stable growth. Those ups and downs that we’ve been through can be tough on everyone, not just the workers, but the community as well,” Bowman said.

Getting a coffee from a Tim Horton’s drive-thru in Fort McMurray would take an average of about 20 minutes back then, Bowman said. Now, achieving a double-double takes just 11 minutes “on a bad day,” he said.

While a major airport expansion completed in 2014 remains “underutilized” and the buzz of saws and other construction noise has subsided, Bowman said Fort McMurray’s 2022 economy is healthy. Its residents are working and getting paid, and life goes on.

“There’s still a lot of opportunity and a lot of ‘get help’ signs around … the industry isn’t expanding like it used to,” Bowman said.

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