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New oil production will lead Alberta and Saskatchewan out of recession and in to economic growth by the end of 2017, according to the Conference Board of Canada.
Alberta is set to see GDP growth of 3.3 percent this year, despite the province suffering two consecutive years of economic contraction.
“Nonconventional oil production in the province will see a big increase this year thanks to new capacity coming online, while energy investment is expected to make a comeback this year and next,” CBC said in its press release.
Two years of low oil prices have hit Alberta’s budget where it hurts. The new budget banks on barrel prices reaching $68 a pop within the next year—a growth rate that futures markets deem largely improbable. At the time of this article’s writing Brent traded at $51.07.
The province’s politics have transformed in recent weeks in preparation for the 2019 elections. Two conservative parties in the oil-rich state—the Progressive Conservative Party and the Wildrose Party—merged in May to oppose the leftist New Democratic Party. The right-wingers are hoping to seriously challenge Premier Rachel Notley at the polls, unlike what happened in 2015 when divisions amongst conservative factions cost them the province’s top office.
Oil from Alberta is the United States’ single largest source of oil. The province’s oil resources are vast, but almost three years of low oil prices have created a C$10.3 billion hole in the state’s budget.
"If the election was today they [the NDP] would be sunk and defeating a unified conservative party would be very difficult," Duane Bratt, a political scientist at Mount Royal University told Reuters last month. "Some people are blaming the entire economic downturn on the NDP, even though it was occurring before they were elected."
By Zainab Calcuttawala for Oilprice.com
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