Crude oil is a global commodity, and a cornerstone of several national economies. In recent months the price has fallen drastically, below the $50 global threshhold for the first time since 2009. At home this translates to companies like Suncor cutting 1,000 jobs.
A Suncor employee working in Fort McMurray, who wished to remain anonymous, lost her job in December. Her reaction was one of disbelief. “It’s incredible how something so far away could have such a large effect on all of us out here… it affects everything,” said the former employee.
“The bottom line is that there’s a substantial increase in the supply of oil in the world market and that drives the prices down,” said Dwight Bramble, an economics lecturer at the University of Regina.
Four main factors have led to this downturn. Libya has returned to the world as an oil producer, after conflicts in 2011, and saturated the market further. America is now the world’s largest oil producer and importing less oil. There is less demand from consumers and alternatives to oil are being pursued.
At the same time, OPEC nations are refusing to halt their production and export. The 12 members of OPEC are estimated to produce 40 per cent of the world’s oil and export 60 per cent of all oil traded internationally.
Although the OPEC countries seem a world away, their decisions impact Canadians. The International Monetary Fund downgraded its economic prediction for Canada by 2.3 per cent. In Canada this means budgets won’t be balanced and a traditionally booming sector is experiencing layoffs and hiring freezes.
“Essentially, you have an oversupply, you have a softening demand, and that old law of economics is offset by the OPEC countries,” explained Ed Dancsok, assistant deputy minister with the ministry of petroleum and natural gas division of Saskatchewan. “Normally if they see this kind of oversupply they cut back their production and allow for the price to remain up. That is causing the price to sag because of the oversupply,” said Dancsok.
In Canada, Alberta is especially dependant on oil, and with rumblings of a recession hitting the province's costly ventures like the oil sands will be hit first. “Suncor’s situation is a little bit different. They’ve got a lot of oil sands production and that is a high cost way of getting oil out of the ground. So it’s going to be projects like Suncor’s that are going to be the first to announce cut backs,” said Dancsok.
“Fuck OPEC,” said the former Suncor employee. Now living in Edmonton she is taking house keeping jobs, while applying for other jobs. “What do I do? You have to invest time and money in a trade before it starts to pay off and disruptions like this cause a lot of inconveniences,” said the ex-oil worker.
With the third-largest proven oil reserves, 168 billion barrels, Alberta's downturn is already being felt in the world. Statistics Canada announced manufacturing sales had declined 1.4 per cent in province and a potential decline of $4.5 billion in Albertan oil royalties.
“I think this is a wakeup call,” said Bramble. “We need to seriously start considering alternative energy. Renewable energy, environmentally friendly sources of energy, and energy less demanding on our environment including human beings. Our health, safety, and economic safety included.”
