The Death Of The Canadian Oil Dream, A Firsthand Account
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:
- Canada Crude Contagion: Calgary home Prices Drop Most In 2 Years
- "Canada's Biggest Oil Casualty To Date: Calgary's Nexen Shutters Oil Trading Desk"
- "The Canadian Housing Bubble Has Begun To Burst"
- "Canada's Oil Patch Confidence Crashes"
- "Canada Mauled by Oil Bust, Job Losses Pile Up – Housing Bubble, Banks at Risk"
- "The Stage Is Set For A Massive Housing Market Correction in Canada's Oilpatch"
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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Yep. Just like real estate in Japan in 1990. Which has gone nowhere but down for 25 years
So have Alberta leave Canada, join the United States, and be wealthy beyond its wildest dreams.
And each Alberta citizen will instantly owe roughly $850k in debt.
http://usdebtclock.org/
If they didn't sign up for it they don't owe a cent.
It's called odious debt:
In international law, odious debt, also known as illegitimate debt, is a legal theory that holds that the national debt incurred by a regime for purposes that do not serve the best interests of the nation, should not be enforceable. Such debts are, thus, considered by this doctrine to be personal debts of the regime that incurred them and not debts of the state. In some respects, the concept is analogous to the invalidity of contracts signed under coercion.
See also unconscionable contract:
Unconscionability is a doctrine in contract law that describes terms that are so extremely unjust, or overwhelmingly one-sided in favor of the party who has the superior bargaining power, that they are contrary to good conscience. Typically, an unconscionable contract is held to be unenforceable because no reasonable or informed person would otherwise agree to it. The perpetrator of the conduct is not allowed to benefit, because the consideration offered is lacking, or is so obviously inadequate, that to enforce the contract would be unfair to the party seeking to escape the contract.
No kids. 38% savings rate. 98 Chevy paid for. No cable TV.
Sacrifice is a bitch but at least I'm not stupid.
Not having any kids sounds pretty stupid to me.
It's the very definition of a dead end species.
i don't think the world is in much danger of running out of human beings.
but those who willingly choose not to reproduce, tend to be the ones that the world needs more of.
those who reproduce copiously, are those who the world needs fewer of.
that's the paradox.
... the meek shall inherit the earth...
Misery lives company? haha
I have seen 16 countries with the wife in the past 8 years. Kids are not on my bucket list.
Sounds like Wolves or Shark Moves..... Eat any sheep recently?
With a Converter Boix who the hell needs cable.
Kids are SERIOUSLY expensive.
An Ex-wife is too.
At least I enjoy the time I spend with my kids.
I guess I get to enjoy the rest of my time more given the Ex status.
Haven't had TV this century.
What you describe is not, IMHO, sacrifice.
It's called sense.
My neice bought a house there 2 years ago, I told her not to, and to just wait a bit, but oh no, you know kids today, borrow, borrow, borrow, and never think.
It's funny, the look she gave me when I said to wait, and that a realestate crunch was on it's way, it was like I was the stupid one. lol
A lot of people complain about 'Alberta's money' going to the east (is there anything east of Hull/Montreal?) but think of all the east coasters who have contributed to the boom and are now stuck with these real estate futures. Good workers were drained from the east and may never be able to return and contribute to some of the best farmland/forests in the country.
Know plenty of people in a similar situation, haven't worked in months to over a year and have their multiple house/truck payments. It's going to be a hard struggle, to say the least.
I got the same thing from a sister in law, ya think I got a thank you for advising against buying a $350,000 house for $750,000. At least I saved their skins.
RE hasn't gone down as much as you think yet. Its still stubbornly high. And its still all time record highs in Vancouver
"RE hasn't gone down as much as you think yet. Its still stubbornly high. And its still all time record highs in Vancouver"
Spring it comming real soon! I suspect Vancouver will have more homes for sale than chickens in pots (ie old political slogan: " A chicken in every pot")
The Chinese aren't coming any more to buy canadian bacon (ie prop up Housing prices). No Jobs, No buyers, and a debt to income of 164% is a formula for housing slaugher!
True, look at the new assessments
The places like toronto and Vancouver will get hit the hardest
B.C. property assessments spike up to 30% in Vancouver ...
You don't get web surfing much...do you?
The housing bubble has already popped in some parts of Canada
http://www.canadianbusiness.com/economy/the-housing-bubble-has-already-popped-in-some-parts-of-canada/
Free months of rent, Internet and gift cards: Calgary landlords resort to perks as vacancy rates rise
http://news.nationalpost.com/news/canada/free-internet-and-visa-gift-cards-calgary-landlords-offering-more-incentives-as-vacancy-rates-rise
Canada’s housing bubble at bursting point
http://www.marxist.ca/analysis/economy/1068-canada-s-housing-bubble-at-b...
If one were to look at some of the Canadian oil patch stock, those are some great buying opportunites, or very ugly falling knives....
ERF
PWE
PGH
CNQ
SU
CVE
ECA
IMO Buying that shit would be knife catching. Alberta has some of the most expensive, poorest quality oil on the planet, and it must be shipped long distances to do anything useful with it. It sells at a steep discount vs other oil production and if current prices and global production levels persist, a day may soon come when literally nobody wants to buy the crap.
These big companies are burning through cash because they have NOT stopped plans to keep expanding and building new production. There have been major cuts to the plans, but they have not been shelved. I personally think this is the big red flag. Like some kind of ponzi scheme, I think these companies can only make money in a growth mode, when they are constantly expanding production, so they are all planning on doing so.
The Alberta tarsands just don't make any economic sense to me - it takes huge amounts of resources (energy and water) just to extract the oil from the sand. Compare this to other energy sources that are so much easier to get.
Time will tell in the end.
The oilsands oil needs to be diluted before it can be pumped through the pipeline, then when it gets to the destination, ie Gulf Coast. the dilutent needs to be removed and pumped back to Alberta and the process can repeat. So as you can figure the pumping/diluting/undiluting costs can add up.Then special refineries are needed to process this oil. So yes expensive to mine and process.
That concept of oil extraction from tar sands has always been a total mystery to me. Its like how desperate can it get. The Saudis must still be laughing.
what ever happens won't be as bad as when the USD goes to near zero...all that killin and shit going on, looting, will be like Central Africa republic.
Alberta can just go back to ranching and cattle, in a 100 years they will visit the oil ghost towns.
Now how many Canadian banks will collapse when people leave all those homes and commerical loans that were taken out? Think I will make some withdrawls next week.
Canada only has one bank. And I don't think balsam fir chipboard ghosttowns will stand very long.
Remember that the TPP has outlawed glue shipments to Canada, so we're holding these rough-ups together with maple syrup.
actually Canada has many banks with several having large exposure to USA losses as well with their 'americized' names
TD and TD Ameritrade ala Toronto Dominion
Scotia Bank metals fraud extrodinarie also known as Bank of Nova Scotia, they even have branchs in Greece, first branch just down the road from me
RBC Royal Bank of Canada
CIBC Canadian Imperial Bank of Commerce
All heavily invested in both losing north american economies as well as south and central america
and others that have lent relentlessly to bankrupt Canadians.
btw the Fed reserve bailed out many Canadian banks in 2009, now there are bail ins
Scotiabank Global Site | About Scotiabank
Dominion, Imperial, Royal... all terms of subjucation...
yes like the Federal Reserve
It's what empires do best!
Look at all the parts of the world the Brits stole from throughout history. Most started with the formation of a corporation and continue to be so.
If you have not seen this video about the CDN Banks, I highly recomend it...We were told by our .gov and by our media that the CDN banks were OK after the 2008 US banking collapse.
Study Reveals Secret Bailouts to Canadian Banks
After watching this video you will find that 5 of our biggest banks had to borrow A whack of money to stay afloat and three of the biggest banks in Canada had to borrow more than they were worth. Hence the reason to pass the CDN bank bailout Legislature see here on pages 144& 145 of the Economic Action Plan 2013 - Budget Information
That is when the credit card card companies became more lenient about overdue accounts. I know several people who paid 0.25 and 0.33 on each dollar of debt.
"it was that or not feed the kids"
Either way, the kids aren't eating
Sheeit... our household income is in the range of USD $125K in N. Idaho which is approx 3x the average.
My big gift to myself is a 4 year-old Lib Tech snowboard. No one's coming to repo it either. 100% paid for. lol
Think I'll go ride it in on Silver Mt. tomorrow, in the silver valley. Last weekend I hit 64 mph on the GPS.
Quit moving here fuckers. :)
You get Canadian type snow, cold and weather.
I'll stay in Southern Commiefornia.
The South will rise again!
I moved to Canada from UK in the 80s.
For years I hated winter. Used to pretty much hide away in the house from mid December to April.
These days I'm out as much as possible in all kinds of weather.
I gave up driving about 5 years ago and now cycle almost everywhere, winter included. Last year was a tough one but I only missed riding 2 days. Bought snowshoes a couple of years ago.
Just get out there. Winter is a very enjoyable part of the year.
.
What is scary that was not widely known is that most major Cdn banks were bailed out in 08 09 MORE THAN the value of All of their shares!!
Scary!!! and it won't happen again.. now bail out...
Same will happen in USA.. get your cash out now. Sell the bank stocks
long : gold and silver. guns ammo, beans, rice, peas, gas cans, cheap old mobile homes on rural piece of land
Yes, apparently Goldman Sucks uses RBC as a conduit to funnel notes into our Country. Corruption is not just reserved for the US Banking system. It is worldwide.
Bail ins this time around. I have zero dollars in a bank. As Omega Man precautions have been taken. Small mortgage yes, but all else is paid for. Gold/silver, G&A, food stuffs, and even cryptos....Diversify is key. Whatever will work when needed.
Wife and I went to a movie tonite, watch "The Big Short", HIGHLY recommended. For Mainstream, it was excellent. 90% of viewers scratched their heads, not sure if they got the shaft or not. Why bother!!!
Dont worry, us Canadians are just fine. Dont worry, we can survive this, move along, nothing to see here. Oil is less than 10% of our GDP...
In the mean time, surely use us as a model to feed your doom porn. After we legalize it, then we'll punt the queen from our $20 bill...
PS: we have the largest bread basket in the world... oh, and something about potash and gold...
https://www.youtube.com/watch?v=VRFCMM3bra8
I wonder if the gov will nationalize all the assets...
Omega_Man are you MR Anderson?
no, I am Morphius
smoking crack instead of taking pills doesn't mean your reality is any better then mine! lol
Which bank takes the first bail in...
My guess is Scotia bank with their nic and easy 0% down options along with their very very low qualifying standards..
I bet they go for the Vault, and take 10% cut over 100k... If they are really bad they will take it all over 100k per person.... the vault and those saftey deposit boxes are gone first thing... What was in those? no idea.....
Any other bets?
ALL CB's are controlled by a chosen few. In USA and CDN, the banking agents report to the same masters. They do what they want and when they want. We Amerikans just like to poing the finger at others misery cause you know...exceptionalism.
All banks are, in fact, banks.
Cars run on gasoline, banks run on fraud, water is wet............
Not this time, Big Jim. The Name of The Game is Leverage and the Saudis are taking your credit fueled C-economy all the way down.
FFS, OIL IS LESS THAN 10% OF OUR GDP. WE ARE SELLING ARMS TO THE SAUDS AS WE SPEAK. WTF?!?!?!