EDMONTON, Alta. – The fact that global oil prices are down should surprise no one who’s been paying attention to the news over the past year or so. But how does that affect Alberta, a province that traditionally has lived and died by the price of oil?
Not surprisingly, it depends upon who you ask.
Truck West reached out to the Alberta government, a couple of trucking companies who operate in and around the province’s oil patch, and the Canadian Association of Petroleum Producers for their takes on the subject.
Their responses ranged from looking ahead long-term toward a positive future, to trying to cope with the present, to beating the dead corpse of a long-time government whose buttocks was handed to it in last May’s provincial election.
It appears, however, that no matter how you slice it, as of right now things are quiet in Alberta’s oil patch.
According to the general manager of one oilfield services trucking company, who didn’t want to be named in this piece, the oil business is “very slow. There’s not a lot of oil to haul these days.”
The GM, whose business is headquartered in the Alberta/Saskatchewan border-straddling city of Lloydminster, said that in order to cope with the drop in oil, the company is now doing more agriculture, grain and cattle hauling. And while there’s been widespread speculation that
Alberta’s new NDP government might frighten off businesses with its fiscal policies, this particular manager doesn’t think that’s the case, at least not yet.
“I don’t think the NDP’s helping,” he said, laying most of the blame for the current state of affairs on the low price of oil. And, to him, that means it doesn’t matter if the oil is in Alberta or Saskatchewan.
“We work for about 16 companies,” he said, “most of which have head offices in Calgary so even if they have properties in Saskatchewan then chances are good they’re feeling the pinch in one way or another.”
Allen Fandrick, who owns Allen’s Transport of Leduc, Alta., just south of the provincial capital, told Truck West in a recent interview that the biggest challenge his company faces today – besides the usual issue of finding drivers – is the price of the black gold. But not necessarily because of the price itself. “The oil companies are hammering more and more for discounts and rate reductions,” he said, “and so keeping rates up is a big challenge.”
Alberta’s new NDP Energy Minister, Marg McCuaig-Boyd, responded to Truck West’s queries via an e-mail statement that, unfortunately, didn’t really say much about the current state of the oil patch. Rather, she took the political route, responding that “As Minister of Energy, I want to ensure the long-term stability of the energy industry, and the thousands of good jobs it provides to Albertans. Everything we do in the Ministry is centered on the following pillars: prosperity for Albertans, stability for the industry, and certainty for investors.”
McCuaig-Boyd went on to write: “We are committed to working with the oil and gas industry to expand safe market access and improve our environmental record to build support for Alberta products in markets that are not available to us right now. We will move forward in a balanced way that ensures sustainable growth for our energy industry and for Albertan families.”
She blamed the current challenges squarely on “bad decisions made by previous PC governments. They squandered opportunities when oil revenues were high, leaving the province unprepared for times like these.”
Her only mention of the collapse in oil prices was that it “does provide the government with an opportunity to drive innovation and diversify the economy” and noted that “the fall budget will put the province on the road to financial stability in these tough times. While it will take time to reverse the damage that was done by previous PC governments, our government has taken steps to rebuild the economy while protecting the public services that Albertans rely on.”
So far, the provincial government’s plans to rebuild the economy include raising corporate taxes by 20% (from 10 to 12%) and holding a royalty review despite calls from industry and the political opposition to put those plans on hold for now.
According to an Aug. 21 Calgary Herald piece by Darcy Henton, premier Rachel Notley rejected the calls to hold off at a ceremony marking the anniversary of Treaty 6 with the First Nations, held at Edmonton City Hall.
“We’re still going forward with those,” the Herald quotes Notley as telling reporters after the ceremony. “Alberta still has by far the most competitive tax regime in the country, and so when times get tough those who are profitable should be paying just a little bit more.”
Despite politics and current global economics, the Canadian Association of Petroleum Producers thinks all will be well, eventually.
“The sharp drop in world oil prices over the past year is slowing the growth of Canadian oil production over the next two decades,” the organization said in a June release trumpeting its 2015 Crude Oil Forecast, Markets and Transportation report. CAPP estimates overall Canadian oil production will increase 43% by 2030, from 3.7 million barrels per day last year to 5.3 million barrels. The report also noted that “increased transportation capacity, in all forms, is therefore needed to meet growing domestic and international demand for Canadian oil.” That should come as good news to the trucking companies currently struggling to stay afloat.
CAPP noted that, according to the Paris-based International Energy Agency, Canada has the world’s third largest proven oil reserves, but only produces “3.7 million barrels of the 93 million barrels consumed every day around the world.”
So there’s plenty of room for growth in a world whose needs for petroleum products CAPP said is expected to increase 37% over the next 25 years.
“We have the energy the world needs – our challenge is getting it there,” said Greg Stringham, CAPP’s vice-president, oil sands and markets. “Over the next two decades, we believe all forms of transportation will still be needed to move Canadian oil to markets to the east, west and south.”
If true, that’s more good news for trucking, eventually.
The primary driver of oil growth in Canada will remain the much-pilloried oil sands, CAPP said, with production reaching “four million barrels per day by 2030.”
CAPP predicts that conventional oil production in Western Canada, including condensates, will reach 1.3 million barrels per day by that year as well.
For now, however, “oil producers in Canada continue to evaluate their growth plans,” CAPP said, adding “this market uncertainty is reflected most in the oil sands growth range in this year’s forecast,which indicates that “future projects are under review.”
It appears that, if CAPP is right, there’ll still be a good future for the oil and gas industry in the Canadian west (and the east as well), despite current low prices and ideological issues. And that will be good news for the trucking companies who work in the sector. If they can hang on that long.