This is a post from Alex Carrick's blog that covers the Canadian construction industry.

Since 1985, Mr. Carrick has held the position of Canadian Chief Economist with Reed Construction Data's CanaData, the leading supplier of statistics and forecasting information for the Canadian construction industry.

Go to Alex Carrick's blog home

Construction Industry Forecasts

Notes from Alex Carrick - May 06, 2010

Alex Carrick
Like Rocky, Alberta has comeback potential

The following are some rapid-fire observations about Alberta’s economic prospects in light of Canada’s strong gross domestic product (GDP) showing of late and rapid growth in emerging nations.

Alberta is just as dependent (actually more dependent) on natural gas extraction and exploration as on Oil Sands work.

The price of natural gas per million cubic feet, on an energy-equivalency basis, should be 1/6 the price of a barrel of oil. Instead, it’s only currently about 1/20.

Natural gas industrial usage throughout North America has dropped with the recession. But the other factor in the price equation has been the opening up of supplies, particularly from Shale fields.

This has been made possible by new technology allowing horizontal drilling, as opposed to straight down vertical drilling.

However, there are a couple of issues with respect to shale natural gas. 1) Environmentalists want studies done on the impact of such drilling on below-ground water table reservoirs. And 2), according to some experts, these fields deplete at a faster rate than traditional sources.

As for the oil sector, the fact that global prices have recovered about half of their peak to trough drop is very encouraging.

Furthermore, it is hard to see how the price of oil can do anything but keep going up in the short to medium term. Just think about the surge in car-buying demand in China and India. More cars are sold in China every month now than in the U.S.

Also, the Ed Stelmach provincial government has promised to make changes to its royalty regime to bring back more investment. This is in reaction to the concessions made to energy firms by Saskatchewan and B.C.

Yes, Alberta will recover much of its former glory as world recovery continues, but there are some problems to confront.

There are tough new auto emission standards coming into place for 2016 in both Canada and the U.S. (100 kilometres on six litres or less of gas on average over an automakers’ total fleet). To the degree that these goals are realized, there may be some cutbacks in the demand for oil.

Environmentalists will be increasingly attacking the scarring of the land and the polluting of the waters around heavy oil extraction and processing plants. The industry has answers for this, but will have to become more effective in communicating its message.

BP PLC’s embarrassment in the Gulf of Mexico is perhaps changing the perception of Oil Sands production vis-à-vis whether or not it is adequately and relatively eco-responsible.

There are likely to be increasing costs for Oil Sands projects due to carbon taxes or cap and trade systems as they are introduced in the United States and Canada.

There will also be the old problem of attracting workers. Many skilled construction types have returned to their home provinces and have found them to be more prosperous than when they left. Some of these regions are offering good job prospects in resource areas.

Saskatchewan has become a “have province”, as has Newfoundland.

In summary, in the next up cycle, Alberta’s oil and gas industry is not likely to have as easy a go of it as during the early part of the past decade.

Alex Carrick

Find Canadian construction-related economic articles in Canadian Construction Market News and in the Economic Outlook section of Daily Commercial News. Mr. Carrick also has a lifestyle blog that can be reached by clicking here.


RSS Feed

» back to blog home

Member Comments

Post Your Own Comments 
» Not a member? Register now to become one. Otherwise, login to post your comments on this article.

Read Other Recent Alex Carrick Posts

10/12 - Latest Economic Nuggets: Mid-October 2012
10/04 - Auto Sales Set a Blistering Pace in the U.S. and Canada
09/18 - Canada’s Energy Future is Assured, Right? Think Again
09/14 - Latest Economic Nuggets: Mid-September 2012
09/06 - Auto Sector Labor Relations will Play a Role in Construction Outlook
08/30 - Raucous Behavior in the Party Room Next Door
08/13 - Latest Economic Nuggets: Mid-August 2012
07/31 - Canada’s GDP Advanced a Timid 0.1% in May but Support Will Come from Better U.S. Home Prices
07/19 - Finding the Pearls in the Latest U.S. and Canadian Economic News
07/13 - Latest Economic Nuggets: Mid-July 2012
07/04 - U.S. Auto Sales Continue Bullish While Canadian Incomes Languish
06/28 - Three Pivot Points for the World Economy - U.S. Housing, Europe’s Conundrum and Oil Prices
06/14 - Economic Nuggets – June 15, 2012
06/06 - Canada’s First Quarter GDP Growth Met Expectations, But What Comes Next?
05/30 - Ontario has a Backbone of Strength for the Decade Ahead
05/14 - Economic Nuggets - May 15, 2012
05/11 - Canada Rode a Second Consecutive Month of Strong Job Gains in April
05/04 - U.S. Employment Rose by a Mediocre 115,000 in April
04/27 - U.S. GDP +2.2% in Q1 2012 and Alberta led Canadian Provinces in 2011
04/18 - U.S. Inflation Low in March; Canada’s Central Bank Looking to Raise Rates

click here to update your log-in and member information

click here to maintain your company profile & view metrics