Can Fort McMurray break the ‘Boom and Bust Cycle?
By: Frehiwote Negash –
The decline of oil prices since last June has caused upheaval in the Canadian economy and world markets. From a global perspective, many countries are in dire straights with oil hovering under $50 per barrel. Major oil producing countries like Russia and OPEC member Venezuela face economic collapse with oil staying at the current price. The volatility in the Middle East with the death of King Abdullah and the presence ISIS make forecasting OPEC̕̕ s oil policy a difficult challenge. On the home front, Alberta is expected to fall $7 Billion short of its forecasted revenue. The Bank of Canada cut the national interest rate to prevent inflation and a housing downturn in light of the oil shock. The current situation has forced Alberta Premier Jim Prentice to consider an unpopular provincial sales tax. News of the federal budget potentially going into a small deficit with oil at the current price presents new challenges to the Harper government in what could be an election year. Plunging oil prices have already started to affect the labour market as oil companies like Shell and Suncor have already started laying-off workers and slashing capital budgets. In the midst of all this, Fort McMurray Mayor Melissa Blake is still hopeful of her town’s prospects. Blake states that residents are still “living life as they alwayshave.”
One would expect a politically savvy person like Blake to respond to crisis with optimistic platitudes. The reality is that Fort McMurray exists solely because of the oil industry and the facile argument of life being the same fails to address issues that residents have to face. In a town of 76,000 people made up of mostly migrant and temporary workers and where housing is at a premium, life has already started to change. Mayor Blake states that “Plants are still in operation, we still have jobs, we get up and go to work every day, and we spend our money just as we normally would,”. Business owners beg to differ as they have seen a decline in sales as a result of the downturn.
This isn’t the first time the residents of Fort McMurray have faced economic woes. Residents weathered the most recent downturn in 2009; one which many have called a blessing in disguise. This downturn could last longer a lot longer with companies cutting future projects and more layoffs on the horizon should oil hover at its current price. The uncertainty has forced some residents to put their homes on the market as a precautionary move. While many living in Fort McMurray believe that they can weather the storm, a sustained downturn of could see Fort McMurray become a ghost town.
Sources: Business News Network, Globe and Mail, CTV News, CBC News