Oil at the time of writing this is currently sitting at $26.54, down 60% from its 52 week high of $65.61. The days of paying $100 a barrel are over folks, but how does this affect you? For Canadians this means a weaker dollar (.72), say goodbye to that trip to Las Vegas this summer.
For Albertan residents, even employment looks bleak, with layoffs totaling over 35,00 for the oil Industry, Alberta is becoming a very normal province. We were living in the heydays where $100,000 salaries were something of the norm.
We are approaching times of struggle in Alberta something that has been the norm for the rest of the country. Oil will struggle just like the other industries. It is no longer about the best-trained men, all that matters is the bottom line!
Trends look towards a similar economic crash that occurred in 1980 which was also preceded by a similar oil boom. With oil prices soaring from $3 to $40 it was the golden ages in Alberta, a time that largely created what Calgary is today. In the early 80’s there was a worldwide recession causing an economic crisis in Alberta. Cue the bust, with Alberta leading the nation in foreclosures, suicides and bankruptcies. It was scary times in the oil province and everyone was affected. Real estate prices didn’t recover until the early 2000’s.
Now there is an argument that this is not like the 1980’s. Many citing high-interest rates as the blame. Interest rates were at a whopping 21% at the time. Lack of employment meant you could lose everything very quick, and sadly people did. With current interest rates at 0.5% the demise of wealth will come a lot slower, but that does not mean it will not come.
With housing prices down 1.7% for the month of December in Calgary and down 2.6% from last year, there are no signs of up. Real estate will take a much longer time to decline this time around because of interest rates. As well as stubborn owners with inflated personal values of their homes. The residential decline will happen much slower in part because of the increased elasticity of demand. People can afford larger loans therefore, they can afford their homes for longer when unemployment or payouts strike.
With retail sales, employment and oil all down, coupled with the NDP government and increased taxes, the economy does not look good. You can ignore the signs for a while but eventually it will affect your livelihood. Let us all pray for an oil turn around and Alberta to rise once again as the financial king of our nation.