The Death Of The Canadian Oil Dream, A Firsthand Account

Tyler Durden's picture




 

We’ve spent quite a bit of time over the past 12 months documenting the trainwreck that is Alberta’s economy.

Most recently, we brought you "This Is Canada's Depression: Surging Crime, Soaring Suicides, Overwhelmed Food Banks" and "For Canadian Repo Men, Business Has Never Been Better", but you can review the story in its entirety by revisiting the following posts:

In short, Alberta is at the center of Canada’s oil patch and has suffered mightily in the wake of crude's seemingly inexorable decline.

Going into last year, Alberta expected its economy to grow at a nearly 3% clip. That forecast was reduced to 0.6% in March and further to -0.6% in the latest fiscal update. Oil and gas investment has fallen by a third while rig activity has been cut in half.

The fallout is dramatic. Food bank usage in Alberta is up sharply and so, unfortunately, is property crime in places like Calgary where vacancy rates in the downtown area are at their highest levels since 2010. Suicide rates are on the rise as well while the outlook for unemployment continues to darken with each passing month of “lower for longer” oil prices.

Below, find excerpts from an excellent account of the malaise penned by Jason ‎Markusoff who writes about Alberta, lives in Calgary, and has spent 12 years reporting for the city's largest newspapers.

*  *  *

From "The Death Of The Alberta Dream," by Jason Markusoff as originally published at Macleans

Late last year, Brandon MacKay listed his Kawasaki dirt bike for sale on Kijiji, the online classifieds site. It was the only treat the 25-year-old had given himself in three years living in Fort McMurray. The rest he’d spent on supporting and visiting his wife and kids in Pictou County, N.S. But in crafting the ad for the bike—$4,400 or best offer—MacKay did what any sales agent would advise against: he revealed his desperation to sell. “I lost my job and am in need of money for my wife and kids for Christmas.”

Energy companies are preparing for a grim 2016. Analysts predict budgets will get slashed further, and that more energy firms may have to cut staff, having already laid off thousands. Ongoing oil sands construction projects will continue to wind down with little to replace them, hitting both the residential and commercial real estate sectors hard. For instance, in nearly one-sixth of all the office space in downtown Calgary, the fluorescent lights now shine on empty cubicles, and it’s forecast to get worse. Reports of the symptoms pop up almost daily: more insolvencies, more business for moving trucks and repo crews, even a noticeable uptick in suicides. The Calgary Stampede itself has been forced to lay off staff, as its offseason event bookings dried up. In November, the Alberta unemployment rate came within one-tenth of a percentage point of the national average, the closest it’s been since 1989. Those trend lines are expected to cross over next year, making it more clear to Canadian job-seekers that the Alberta dream is in decline.

The rest of the country isn’t immune from those ominous grinding sounds coming from Canada’s longtime economic engine. Canadian GDP dipped into recession territory in the first half of 2015 on the oil shock, and though the country managed a rebound in the third quarter, Alberta’s troubles—as well as slumps in other oil-rich provinces like Saskatchewan and Newfoundland—have left a gaping wound. The energy sector had long driven Canada’s trade surplus, papering over weakness elsewhere while soaking up large numbers of unemployed and underemployed people from regions like the Maritimes and hard-hit southwestern Ontario.

But even average growth seems a ways off, as troubles keep filtering through the province. In Alberta’s southeast, Medicine Hat drew international acclaim in the spring of 2015 after it became the first city in Canada to eliminate homelessness, having pursued an ambitious five-year agenda to put people into subsidized housing within 10 days of them landing in emergency shelters. After so much progress, Medicine Hat’s Salvation Army shelter is back to averaging 17 clients a night, up about one-third since 2014—too many to promptly find them all affordable housing. Local demand for donated clothing and household items also rose by more than a quarter over the last year, says manager Murray Jaster. But donations slumped too, and he had to reduce staff.

To Jaster’s point, there is much his province used to have that now seems gone. Most noticeable is Alberta’s eroding status as the Promised Land for so many Canadians from other parts of the country. Over the last decade, net interprovincial migration by 18- to 44-year-olds, the key working demographic, swelled Alberta’s population by 200,000, according to a report by a rather envious Business Council of British Columbia. (That province netted fewer than 40,000 over that stretch, while all other provinces were net losers.) The momentum has shifted. While 1,200 more Canadians still moved to the province than left it during the third quarter of 2015, that was the smallest gain since 2010—when the province was recovering from the 2009 oil price collapse—and less than half the average of the last 50 years.

“Seeing that there’s no real light at the end of the tunnel right now, more [companies] are turning to job cuts,” says Wendy Giuffre, the president of Wendy Ellen, a human resources consultancy. “It seems that there’s another wave right now. I think people were kind of hopeful things were going to pick up sooner, but it’s not looking too promising.”

Statistics Canada’s payroll survey shows Alberta shed 63,500 jobs over the year leading up to October. That doesn’t account for lost potential—the Canadian Association of Petroleum Producers estimates 40,000 jobs that were expected to be created never materialized.

It’s no secret that Alberta’s economy is closely linked to the peaks and craters of oil prices—nominal GDP (not adjusted for inflation) swings in tandem with crude prices. It’s why Fort McMurray is like a wounded beast these days. MacKay’s neighbour got laid off this fall. “I watched the bank come and take his truck,” he recalls—it was that or not feed the kids. Home prices in November were 20 per cent below last year’s average, with even townhouses and duplexes losing $100,000 in value. According to reports, a number of people who used to regularly donate to the city’s food bank have become clients.

What happens in the oil fields directly affects one of Canada’s largest business cores. Elevator trips to Beaver’s small ninth-floor Calgary office have gotten lonelier. Nearly one-third of the office space in the 32-storey highrise is listed for lease or sublease. The asking rate to rent downtown Calgary’s “Class A” office space is down nearly 42 per cent from last year, the result of “a complete lack of demand,” according to a report by real estate advisers Jones Lang Lasalle. 

The hollowing out of Calgary offices has decimated the corporate lunch crowd. Regulars who would come to Jalapeno’s Mexican Grill three times a week now visit once, or not at all, owner Doug Hernandez says. “We’re not making any money; we’re just floating right now,” he says. “The problem would be when I’m not wearing my lifejacket anymore. Then I’d drown.” 

Much more in the full article here

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Fri, 01/08/2016 - 22:47 | 7020170 arbwhore
arbwhore's picture

1985 all over again. Cowtown is well used to this.

Fri, 01/08/2016 - 23:00 | 7020204 duo
duo's picture

Dallas and Houston went through this 30 years ago.

Fri, 01/08/2016 - 23:43 | 7020331 CrazyCooter
CrazyCooter's picture

Yup. This is the 80s oil crash - at least for a relavent reference.

But, it is an older story ... consider the following ...

https://www.youtube.com/watch?v=oYYs4aSLHnc

(personally the this is one of the best recordings)

Regards,

Cooter

P.S. The live Willie is pretty bad ass too! :-)

https://www.youtube.com/watch?v=Y3LqTzjmJ54

Sat, 01/09/2016 - 01:18 | 7020599 BaBaBouy
BaBaBouy's picture

OIL in CAD is still $46.50 ... Still survivable...

But Why isn't Texas crashing ??? Expensive Fracking is still going on at $32 usd unabated.

WTF ???

It's more like a COMPLEX House Of Saud / US Paper OIL game to crash certain nations, yes?

 

 

Sat, 01/09/2016 - 03:24 | 7020806 Early Retirement
Early Retirement's picture

Bitumen is running around CAD $28.

Sat, 01/09/2016 - 08:45 | 7021077 JungleCat
JungleCat's picture

If this is like 1985 all over again, then there is only one solution: bail them out.

It will be good practice ahead of up coming banksta bailouts. Bail, print, rinse, repeat.

Sat, 01/09/2016 - 08:51 | 7021087 HowdyDoody
HowdyDoody's picture

The Canadian lawsuit against US blocking Keystone XL is heading for the Investor State Dispute Settlement scam. The plaintiffs have raised penalty and unconstitutionality cases. The best thing for the investors is the penalties are unbounded and not reviewable or appealable.

http://off-guardian.org/2016/01/09/transcanadas-15b-lawsuit-against-u-s-...

The taxpayers get stiffed et again.

Sat, 01/09/2016 - 10:41 | 7021299 Lyman54
Lyman54's picture

Western Canadian Select was $19.02 US yesterday and that is if an oil company was able to sell it.  The pipelines, or lack of, are the chokepoint.

Sat, 01/09/2016 - 12:51 | 7021848 Kayman
Kayman's picture

Western Canada Select (the largest component of the Canadian oil trade) is around $18.60USD.

You're only off by =/- $30USD.

It is a disaster up there. And now they have 2 socialist governments looking for warm blood to drink. I think Alberta/ and Canada governments' straws are going to tap dry holes.

K

Sat, 01/09/2016 - 07:16 | 7020974 The Ingenious G...
The Ingenious Gentleman's picture

Good stuff!

Sat, 01/09/2016 - 19:22 | 7023319 sonoftx
sonoftx's picture

I'm a day late and a dollar short. HE IS THE MAN!!! Thanks for the link. Awesome. It will be a sad day......

Sat, 01/09/2016 - 02:56 | 7020771 Buster Cherry
Buster Cherry's picture

I was a machinist at Dresser Atlas when I got laid off in 1982. I thought I'd just go up the street to my next job. Little did I know I'd never cut metal again... ever

Sat, 01/09/2016 - 03:22 | 7020805 Early Retirement
Early Retirement's picture

Which Dresser plant? I worked there in Houston as a machinist around then.

Fri, 01/08/2016 - 23:15 | 7020259 jusman
jusman's picture

I was in sales out of Vancouver covering BC Alberta and Sask starting end '81.  I recall visiting calgary in early '82 and seeing a real buzz - cranes, new buildings, business left and right.  Then a year later - nothing.  Dead.  No business...

Booms and busts has been the oil economy.  It's been a good ride for the last decade (anyone with a heartbeat could earn more than $50k, and with an education, $100k).  But all booms can become busts. This one lasted long enough that those that remembered the busts had all retired - and those that were still working were/are not prepared as they had not experienced the busts!

Fri, 01/08/2016 - 23:36 | 7020329 Global Hunter
Global Hunter's picture

I was still young in the 80s but we had a lot more manufacturing in Ontario then I remember.  I think proportionally a lot more people from Ontario and down East have grown to depend on work/money coming from the Province of Alberta during this boom than the last one.  So many of the young men from around here with skills and trades have gone there to work because there isn't really much work now outside of white collar jobs in the major urban areas.  Most of the small town mills and factories have closed.

This is going to affect the whole country worse than the last one.  As jusman said those that remembered the busts have retired.  In Canada even still today if I said the economy wasn't doing very well they'd think I was a complete idiot.  There is a foolish arrogance here and I think reality is going to hit a lot of people really really hard soon.  When the shoe drops this could get ugly.

Sat, 01/09/2016 - 01:08 | 7020550 nope-1004
nope-1004's picture

In addition to your point, in the early '80's families weren't living in $800K homes with a $600K line of credit on it.  This is so much bigger than '82 because back then, high interest rates crippled borrowing power.  Today, solvency is crippling everyone because the mountains and mountains of debt that have been accumulated are staggering.  And the sick part is that anyone putting down $200K on an $800K house is, by bank defintion, within "budget" (25% equity).  Now try and sell the cocksucker today for $600K!

Anyone born in Alberta after 1984 has no idea what a recession is, let alone spending less and being on a budget.  There is an entire generation buying (or had bought) houses way too big for any practical purpose and now with migration on a net loss basis, as well as aging demographics, housing is going over a cliff.  There will be empty shacks all over.

Interesting article I read not too long ago about how all the workers leaving the province are just parking their cars at the airport and abandoning them.

http://www.edmontonsun.com/2015/09/25/abandon-vehicles-at-edmonton-inter...

Sat, 01/09/2016 - 04:33 | 7020864 Fullthrottle
Fullthrottle's picture

Its like the Scrapyard Guy in Wiliston,ND that has hundreds of left behind motorhomes on his land. Amazing shit. 

Sat, 01/09/2016 - 08:07 | 7021020 Son of Loki
Son of Loki's picture
CMHC chief paints bleak picture of risks to Canadian housing

 

http://www.bnn.ca/News/2015/11/11/CMHC-chief-paints-bleak-picture-of-ris...

Sat, 01/09/2016 - 23:21 | 7024068 bluskyes
bluskyes's picture

Manufacturing won't come back into Ontario until the insane green-energy policy is abandoned. Hydro rates are up 33% over 3 years in a time of falling fossil fuel prices.

Fri, 01/08/2016 - 23:23 | 7020266 Abitcoinbrain
Abitcoinbrain's picture

Cowtown has had its head up its ass... "it'll will just go back up!" "this happened before" the dynamics have changed! When the times were good they wasted wasted wasted instead of banking, saving, paying off debt, DIVERSIFYING and not being self entitled idiots. 

Do you have any idea how much debt this city has acquired in the last 6 years? You have shit shit shit infill homes that are worth maybe 395 450 being sold for million bucks..... Who the fuck will have a million bucks to spend on that garbage when the oil idiots no longer have money to waste? It's not good for calgary... The consumer debt is massive... They get laid off and live off IE and Credit cards while they wait for oil to go back up ... I know sooo many on vacation in Thailand waiting for that call! 

It will take a decade of good oil prices to catch up from this RUT, GLUT, Sirty Slut of an Oil Bust.

Jesus Titty Fucking Christ Batman Who Saw This Coming?

Fri, 01/08/2016 - 23:27 | 7020299 general ambivalent
general ambivalent's picture

My cousin has been out of work since last spring. They were flown out to BC without a contract even being finalised (could have gone to a few other companies). I have to wonder how much is being spent on similar speculation due to the insane competition over the few contracts out there.

Fri, 01/08/2016 - 23:32 | 7020315 Spitzer
Spitzer's picture

more white street people in Bangkok ? nooo

Fri, 01/08/2016 - 23:50 | 7020366 Omega_Man
Omega_Man's picture

why are you taking the Lord's name in vain? 

Sat, 01/09/2016 - 00:22 | 7020460 spdrdr
spdrdr's picture

Batman?

Sat, 01/09/2016 - 03:20 | 7020801 Abitcoinbrain
Abitcoinbrain's picture

Jesus With his dick out TITTY Fucking those sharp batman boobs

Sat, 01/09/2016 - 03:58 | 7020836 OldPhart
OldPhart's picture

Interjecting into you Canadians, but did you notice that that guy in the picture selling his motorcycle also had a toy hauler, generator and plenty of fuel tanks?  Looks like this kid was spending a lot more on himself than just a motorcycle.  Watched all that happen here (US) back in the early 2000's, mystified by how they could afford dune buggies, motorcycles, quads, trikes, toy haulers, trucks and all the other shit they had.

Turns out they were using their homes as ATM's.  I suffered from debt adversion so I didn't get into that scam.  And I had no clue what was going on.  Watched hundreds of people around my neighborhood disappear from 2008 through 2011...and then a couple years of empty properties.  2014 saw people moving back into them, no idea if purchased or rented.

But the 1998 $75k home I bought was offered a new loan for $360k in 2006.  I didn't bite.  The value dropped down to somewhere close to $90k around 2009 and is now valued (via zillow) at $183k, up 2k in the last thirty days.

Don't know what the true value is, though; it's not like the Chinese are rich anymore.

Sat, 01/09/2016 - 05:09 | 7020888 Scooby Dooby Doo
Scooby Dooby Doo's picture

The true value of your home is what 'a willing buyer' with cash would have paid for it on July 4th, 2009.

Sat, 01/09/2016 - 11:50 | 7021571 847328_3527
847328_3527's picture

The Chinese are in trouble at least the billionaire gubmint employees are now that Xi watches them like a hawk, limits amoutn of rmb that can converted into dollars and also limits the money they can ship out of Mainland. Yes, some find ways around the law but I notice the gubmint ain't sutpid and many are eventually caught and thier assets stripped from them.

Most Americans [excpet maybe crazy californians and new yorkers] are not going to pay $1.2 million for a house worth less then $480k. My borther dumped his $285k house on some Californians for $720k awhile back. He said not one local person even took a look at buying it they all thought it was crazy overpriced.

 

Zillow now has the value at $385.

Sat, 01/09/2016 - 18:11 | 7023050 logicalman
logicalman's picture

I always thought the real value of a home was that it keeps you warm and keeps the rain/snow off.

Am I wrong?

As for a 'willing buyer with cash'?????

More likely to find a T-Rex walking up the driveway!

 

Sat, 01/09/2016 - 18:07 | 7023033 logicalman
logicalman's picture

I've always 'suffered' from debt aversion.

I have a simple rule, if I can't afford it, I do without.

Small apartment - no car - no credit card - no cell phone - no TV - no debt.

Enough savings to last me a year, if I'm careful.

I live in a rented apartment, as it is impossible in this world to actually own a house. Even paid off, you don't own the fucker and you've paid a bank for it multiple times over.

I get my fun mostlly from riding trails on my mountain bike, hiking and archery (shooting bows & making 'em)

I can have an awesome day out for about $10.

 

Sat, 01/09/2016 - 19:21 | 7023316 Pemaquid
Pemaquid's picture

More people should heed your advice. Me, I'm the same way. Out of debt for thirty-plus years. Paid cash for my house. It isn't a McMansion but it suits us fine. Unfortunately, none my offspring followed my lead - in hawk up to their eyebrows. First recession that comes along and they will be hurting, big time. And no, they will not get help from me. Tough love.

Sat, 01/09/2016 - 04:37 | 7020869 Fullthrottle
Fullthrottle's picture

Everytime i hear anyone mutter its only a matter of time and oil will go back up soon i wanna hurl. Get fkn real, it was overpriced to begin with. The Global shitshow is just beginning. Welcome to the circus. 

Fri, 01/08/2016 - 23:38 | 7020332 Spitzer
Spitzer's picture

RE prices are still stubbornly high in Alberta and Vancouver set an all time record, 10% higher a few months ago

Sat, 01/09/2016 - 08:15 | 7021032 vollderlerby
vollderlerby's picture

We saw the same market behavior in New England when the 2008 crisis took off.  Sellers just couldn't bear the idea of their house being worth less than they thought and refused to lower the price.  It came to a point where you couldn't buy a house anymore, no one was selling at the lower prices.  It took a good two years before there was a RE market again.

Sun, 01/10/2016 - 16:47 | 7026274 Abbie Normal
Abbie Normal's picture

That delusional behavior will end as soon as they can't make the next mortgage payment. Prices will plummet overnight just like in the'80s.

Sat, 01/09/2016 - 10:11 | 7021226 zaphire999
zaphire999's picture

After a decade of fucking Joe consumer in the ass, the working class (obviously a part from those directly connected to oil, which I might add we chose not to be in that industry for precisely this current eventuality) are able to get at least one year of relief from these thieving oil tyrants.

Fuck the arrogant oil merchants, whoever lost their jobs or taken a pay cut as a result of lower oil prices, then here's some stern advice, "adapt or die".  I know it's hard lines, but that's life.  One day you're up the next you're down.

At the end of the day, we all still got problems.  But at least for now, oil ain't one. 

Fri, 01/08/2016 - 22:47 | 7020172 Yen Cross
Yen Cross's picture

 The usd/cad is testing pre-millennnium levels.

Fri, 01/08/2016 - 22:57 | 7020196 nmewn
nmewn's picture

And perhaps even, pre-monarchial constitutional levels but they have to consult the monarch...first.

Cuz, Canadians are "exceptional" or sumpin ;-)

Fri, 01/08/2016 - 23:15 | 7020257 old naughty
old naughty's picture

no...get a mag-glass,

take a good look at the clock of the parliament building on the CAD 20 bill...

ang i don't mean the two arms.

Fri, 01/08/2016 - 23:21 | 7020278 nmewn
nmewn's picture

Canada is not an "asset" of the royal family of England along with fifteen other "independent" countries?

This may come as quite the shock to those other fifteen Governor Generals of the Queen ;-)

Fri, 01/08/2016 - 23:27 | 7020297 old naughty
old naughty's picture

that is true, on the surface.

But just like the "gold-plated" new USD 100 with "hidden" (in plain sight message... the CAD 20 may show you someting "exceptional" (if you're going with that).

Is the wizard behind the half-drawn curtain the true master?

Fri, 01/08/2016 - 23:49 | 7020360 Omega_Man
Omega_Man's picture

not really, Canada only pays for their trips when they visit.. otherwise no cash goes to UK Or the queen

Sat, 01/09/2016 - 13:54 | 7022153 golden kafir
golden kafir's picture

The truth is according to the canadian government's own website, that the Crown owns 80% of the land in"Canada"and that the provinces are merely brokers for the crown land administering it to corporations. Also the Queen has veto over parliment.

Sat, 01/09/2016 - 16:55 | 7022781 Reichstag Fire Dept.
Reichstag Fire Dept.'s picture

Canada is a property of the Queen of England. The proof is in the Central Bank of Canada being a Public Bank and not private. Sure, the money supply comes to us via the BIS directly but by BoC corporate edict and not a structural reason like the Federal Reserve where they are strictly private.

I assert that the United States was usurped during the "American Revolution" for the purpose of instituting global financial tyranny. The "Founding Fathers" were terrorists. EVERYTHING you've been told is a lie. I assert that the British Monarchy are the "good guys" 

Why? The Tally Stick monetary system was one of the most successful currencies in the world,driving British colonialism and subsequent Empire until it was replaced by the Bank of England...by the same people that many times tried to institute central banking in the US and we're finally successful with the Federal Reserve in 1913.

So...before you down vote me, think my statements through. What imperical evidence do you really have to refute my assertions? The British Monarchy was placed in "exile" as a financial figurehead. Their silence was bought to legitimize a corrupt financial scheme. 

Just look at what has happened to various European Monarchies. Nicholas II of Russia? Who over threw that family and why? What was the result? Where has that result spread?  Is it so surprising that Russia is the first country in the world to stand up to this global tyranny? Hurt first. Hurt  the worst. First to recover? Putin is doing a hell of a job...nobody has ask, "who is Vladimir Putin?" Is he really JUST a KGB Agent? 

Sat, 01/09/2016 - 14:02 | 7022192 Kayman
Kayman's picture

Yen

Going to 60 cents.

Fri, 01/08/2016 - 22:55 | 7020192 InnVestuhrr
InnVestuhrr's picture

Great opportunity for buying real estate at low prices !

Next summer I will be making a trip in my mobile office to Alberta to buy an estate near Banff NP to add to my international collection.

Fri, 01/08/2016 - 23:24 | 7020287 scintillator9
scintillator9's picture

Banff is for wankers.

That will certainly suit one's taste.

Sat, 01/09/2016 - 00:38 | 7020495 Yen Cross
Yen Cross's picture

lol

Sat, 01/09/2016 - 05:12 | 7020891 Scooby Dooby Doo
Scooby Dooby Doo's picture

Lol back to you.

Sat, 01/09/2016 - 02:49 | 7020762 Buster Cherry
Buster Cherry's picture

Banff National Park is one of the prettiest places Ive been

Do NOT follow this link or you will be banned from the site!