Price of Oil

      Western provinces in Canada have seen their industries change a lot in the past century.  The western provinces are from west to east British Columbia, Alberta, Saskatchewan, and Manitoba.  The latter 3 are also referred to as the Prairies. 

       The Prairies are known for the farmland and the flatness of the land.  Just west  of Edmonton, Alberta the land started  to increase in elevation  as the Rockie Mountains are just a 3-4 hour drive west. Although farming is still great part of the Prairies, the economic landscape changed when conventional oil was discovered in Leduc, Alberta in 1947.  Oil and gas are concentrated mostly in Alberta, but there are concentrated areas of Saskatchewan and British Columbia.

       Alberta in particular is known for boom and bust cycles with the commodity of crude oil.  Alberta has two different methods of extracting oil from the ground.  The first method is by using drilling rigs to drill for oil and all the secondary services. The second method is extraction by mining.  The latter involved extracting oil from the dirt which in the Fort McMurray and Wood Buffalo region of Northern Alberta and if often referred to as the oilsands.  The extraction of oil from the oilsands involves the use of lots of energy and there needs to be a higher price per barrel of crude oil then what the current price is.

       Currently, Alberta has the 3rd biggest oil reserves in the world, behind only Saudi Arabia and Venezuela.  The ecomony of Canada has a lot riding on the oil and gas industry.  The oil and gas industry not only employs people in the western provinces, but people from all over Canada work in the oil industry either moving to where the jobs are or flying back and forth to their place of residence.  The reason they are able to fly back and forth is due to the high wages.

   

        
      The price of a barrel of WTI crude oil was trading at $45.82 at the time of this writing.  It is often said that one operating drilling rig creates around 135 jobs, not all oil field related.  These jobs include restaurants and hotels to service the oil and gas workers.

       From the chart, we can see that oil has been struggling to reach $50  since January 15.  This has caused massive lay offs in the oil and gas sector which leads to people losing their homes and families being torn apart.  People who have high expenses, will find it difficult to replace the income that they made in the oil and gas sector.  The recession in Alberta has effected other businesses and communities all across the country. 

Conclusion:

        In North America, we have not had a recession since the big financial crisis of 2008-2009.  A recession usually happens approximately every ten years.  Currently, we have the stock markets in North America flirting with new all time highs although the price of oil is low.  So if North America goes in to a recession the price of oil will be impacted even more. 

         I think Alberta will be in major trouble if we have a North American recession. 

DISCLAIMER

I am not a financial planner, financial advisor, accountant or tax attorney. The information on this blog represents my own thoughts and opinions and should NOT be taken as investment or business advice.

Every individual should do their due diligence to make their own financial decisions based on their financial situation and tolerance for risk.