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The Canadian province of Alberta has been hurt by the low price of oil that has fallen from at least US$105 per barrel in mid-2014 to current levels of around US$45 per barrel, causing job losses, office vacancies, and disturbing crime trends.
Nearly 19,000 businesses are expected to close in Calgary between 2014 and the end of this year, including nearly 7000 in 2016 alone. Vacancy rates of commercial office space in the provincial capital hit the highest level in thirty-three years at 22.2 percent in the second quarter of this year. This represents an annual jump in vacancy of nearly ten percent.
Dream Office REIT, one of Canada’s largest owners of office space, has written down the value of their Alberta properties by 43 percent as energy firms shed jobs and shrink operations.
Speaking of employment, the jobless rate for Alberta reached its highest point in twenty-two years last month to 8.6 percent. Yet the unemployment rate may be higher since Statistics Canada was forced to estimate values based on nearby regions due to the Fort McMurray wildfires last May.
A report published in July by TD Economics concluded that Alberta’s current recession would likely be the worst one to ever hit the province. Gross domestic product is anticipated to falter by 3.0 percent this year, which will be nearly half the 6.5 percent contraction since the downturn started in 2014.
The economic loss is twice as bad as the previous four recessions to affect Alberta, per TD Economics.
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“The economic fallout from last year's oil price plunge has continued to reverberate through the province so far this year. And just as the global oil market has provided a decent whiff of recovery, the northern part of the province was hit by the outbreak of wildfires in May,” the report detailed.
The weakened economy has led to some calls for a federal bailout akin to the approximately US$10.65 billion given to the automotive industry in 2009. Yet an internal memo prepared for Labour Minister MaryAnn Mihychuk claimed that Alberta’s economy is not as dire as the auto sector was seven years ago.
"With the current downturn in worldwide oil prices, some have advocated a similar type of assistance be made available to support the oil and gas industry," said the briefing note, which was obtained by The Canadian Press under the Access to Information Act.
"However, the context differs considerably. The impact on the Ontario automotive industry was far more acute than what has been seen so far in the Alberta economy," according to the memo prepared last February and prior to the continued weakening of the province’s finances.
By Erwin Cifuentes for oilprice.com
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Erwin Cifuentes is a Contributing Editor for Southern Pulse Info where he focuses on politics, economics and security issues in Latin America and the Caribbean.…