As most of us are doing the happy dance while standing at the gas pumps filling our vehicles, some are saying that the low price of oil is nothing to celebrate. In June 2014, the price of crude was up around $115 per barrel. However, as of January 5, 2015, it had fallen in half, down to $52 per barrel.
The quickest explanation of the story goes like this: for much of the past ten years, oil prices were high and bounced around $100 per barrel since 2010. However, due to soaring oil consumption in countries like China and conflicts in key oil nations like Iraq, oil production couldn’t keep up with demand, so prices spiked.
With a significant drop in oil prices, it does raise concern as to what other industries this could cause trouble for. The Calgary Real Estate Board reported that sales are down 7.5 per cent versus a year ago, while new listings are 42 per cent higher – a sign homeowners are racing to sell before market conditions deteriorate.
But, local realtor with CIR Realty, Corinne Watson says, “It’s too early in the year to tell whether the low cost of oil is going to affect the market. In Dec of 2013 we had 18 home sales and in Dec of 2014 we had 17 so there is definitely nothing to support a decline from those stats. We still have great interest rates and we are still low in active listings so both of those factors should help to keep the market stable. Rents are high priced and hard to come by making rental options unappealing for those that can qualify to purchase. There is no decline that is noticeable at this time. December and this first few weeks into the new year can be slower regardless of the oil prices. Only time will tell at this point”.
President of Star Valley Oilfield Services and Chestermere resident, Alex Halat, gave some insight into what this drop in oil price means to residents of Chestermere and Alberta. “There will be many ripple effects globally or locally. Falling prices will affect government spending, jobs in any industry, etc… Most organizations, especially in Alberta, are not immune to falling oil and gas prices. That being said oil and gas producers and/or oil and gas services companies are going to look at cutting costs to maintain a certain thresh hold of revenue. That means scaling back on perks for employees, salaries and sadly layoffs. In turn you will see a local economic slowdown and slower growth in any community especially smaller ones”.
Halat went on to say, “Unfortunately, job losses have begun within corporate offices. It will be felt especially for those that work in the field. You will probably see operators on the drilling side drill wells that only have expiry dates rather than drill wells to drive up production. That being said with the rig count already low and looking at an early break up you will probably see field hands home sooner rather than later”.
Even though Albertan’s are enjoying the low gas prices, with gas stations in Chestermere having prices lower than $.80/litre since before Christmas, Halat says, “Like anyone we all love to save money. And yes lower prices are a nice perk. You will most likely also start to see lower prices in most consumables as transportation costs go down. However I would be careful in spending all that extra money carelessly. I would suggest people do up a want list and need list. Try and focus on your need list at this time. The reality is with any slumping economy, come wage roll backs and/or job losses. I would suggest people live within their means today until you see a rebound within our economy”.
But just as unpredictable as Alberta’s weather, Halat commented that just as fast as the oil prices dropped, they could, and likely will, bounce back just as fast.
