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Oil Price Implosion Raises Recession Threat For Alberta

OilSandsInFortMcMurrayAlberta.

Oil sands in Fort McMurray, Alberta.

Alberta, the heart of Canada’s oil sand industry and the country’s richest province, is “most likely” headed for a recession this year due to radically lower oil prices, a report by the Conference Board of Canada shows.

Several economists have cut their growth expectations in recent months as the price of a barrel of oil has plummeted from US$105 as recently as June last year to under $45 today. But in its report the board goes further and says the province faces more than just a slowdown — it could see an actual recession.

Related: Canada: A Microcosm Of The Ultimate Effect Of Low Oil Prices?

"Going forward, the province is certain to suffer, especially on the employment front, from the drop in oil prices — and it is likely to slip into recession," Daniel Fields, an economist at the not-for-profit research organization, said in the document.

Chief Economist Glenn Hodgson told Canadian Press Monday that while they are still calculating all the numbers, there’s been around a $12-billion drop in investment in the energy sector since last year.

“Even if the oil prices bounce back to say $65, that’s going to take a lot of steam out of investment, profitability and also consumption in the province of Alberta,” he said.

The first effects of the gloomy trend have already started to pop up. On Monday, Canadian Natural Resources (TSX:CNQ), the country's largest independent oil producer, became the first main domestic energy firm to slash its 2015 budget by $2.4 billion or about 30% as a result of plunging oil prices.

As a consequence, the Calgary-based oil and gas company announced it was deferring the first phase of the 40,000-barrel-per-day project in northern Alberta, originally targeted for the fourth quarter of 2016, until prices for crude — the province main export— stabilize.

Related: British Columbia Bars LNG Pipelines From Carrying Oil Sands

The board predictions are scary: “When prices dropped to such low levels during the last recession, engineering investment in the province nosedived by about $18 billion, some 30,000 jobs in Alberta’s mining sector disappeared, and housing starts fell by 75%,” the report warns.

Tailing ponds issue

Meanwhile, several reports on Monday revealed that Canada is trying to stop NAFTA's environmental watchdog from taking a closer look at the environmental effects of Alberta’s oil sands tailing ponds.

Trade partners Mexico and the U.S. are expected to back up the country’s attempts to stop a formal investigation.

If they succeed, Global National reported, it would be the third time in a year Ottawa has blocked North American Free Trade Agreement scrutiny of its environmental record.

By Cecilia Jamasmie

Source - http://www.mining.com/ 

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  • John Clark on January 15 2015 said:
    Oil producers are leasing tankers for 1 and 2 years with opportunity of renewal.
    Probably 3 years as there are a lot more tankers than there were in 08.

    It is going to take years to get rid of costly oil in storage. In 08 the US bought up a bunch of the oil to top of their reserves. Not this time!

    A protracted lowball sell off of stored oil is still going to take another 2 or 3 years.

    That means no trade available for 5 or 6 years earliest barring a world war.

    Which brings me to Russia. Gazprom is still cutting. Long term deals with China are so cheap that china declared its indonesian gas plants non profitable causing the China gas company to embark on a price cutting action of its own.

    Russia's Ruble has lost more than 50% of its value. Are they going to sit by and do nothing? Its the biggest most mobile armed force in history and Putin is under a lot of pressure at home.

    Looking for a bright side? There isn't one.

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