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'The perfect storm': One analyst says Alberta's economy to be hit by plummeting oil prices

Last Updated Mar 9, 2020 at 11:06 am MDT

A service rig crew performs maintenance and repair work on an oilfield pumpjack and well head site in Alberta on June 20, 2007. THE CANADIAN PRESS/Larry MacDougal

CALGARY (660 NEWS) – The sharp drop in oil prices will have a big impact on the Alberta and Canadian economies.

That’s the perspective from Petroleum Analyst Roger McKnight with En-Pro International. McKnight said he was shocked to see the sudden sell-off on the oil markets.

“Absolute fascination. We’ve got a bunch of things happening all at the same time so we have the proverbial perfect storm.”

Prices for Brent Crude and West Texas Intermediate fell over 20 per cent this past weekend, the largest drop in almost 30 years. Both products were hovering under $35 a barrel Monday morning.

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The trade dispute between Saudi Arabia and Russia was the biggest factor in the decline, on top of growing uncertainty over COVID-19.

“As far as demand is concern, unfortunately, it’s because of something that’s completely out of anyone’s control,” said McKnight. “Until that virus shows some sign of flattening out on this growth curve, this situation is going to carry on for oil producers.”

McKnight adds this will affect the Alberta and Canadian economies but how hard the impact will be is yet to be seen.

“We’re a commodity-based nation no matter what anybody tries to tell you different. It’s going to be very, very tough for a little while. It’s been going on for quite a while for Alberta. This doesn’t look very good indeed.”

Business editor Richard Southern also foresees tough times for Alberta, especially given the United Conservative government is leaning on oil to reach around $57 a barrel as part of its plan to balance the budget by 2023.

In its fiscal outlook, the Alberta government projected $3.2 billion in revenue from bitumen resources on top of an increase in energy royalties.

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McKnight does point out a temporary benefit for consumers as the steep decline in oil prices could lead to cheaper fuel for your vehicle.

“A drop of about 20 cents a US gallon which translates to about seven cents a litre (but) I don’t know how long the oil companies can carry on with that.”