Canada: A Microcosm Of The Ultimate Effect Of Low Oil Prices?
Canada’s economy, lately driven in large part by oil, is a classic example of the old see-saw axiom: Downward pressure in one place creates upward pressure in another.
In this case, the bad news of low oil prices for the provinces of Alberta, Newfoundland and Saskatchewan, which until recently were enjoying an oil boom, becomes good news for Manitoba, Ontario and Quebec.
Alberta is a good model for what’s begun to go wrong in Canada. Already, three huge oil companies have canceled oil sands projects there: Shell of Britain at Pierre River, Statoil of Norway at the Corner oil field and France’s Total at the Joslyn mine. And more cancellations are expected as what feels like a non-stop drop in oil prices drives even more energy companies to postpone or even cancel projects.
Related: How Broken Are The Energy Markets?
The reason is that Alberta, Newfoundland and Saskatchewan have been experiencing a boom not in oil, but in oil sands, sandstone impregnated with crude oil. While shale oil is expensive to extract, oil sands are expensive to clean. And at the current average price of crude, which is now just above $50 per barrel, both forms of oil are becoming less and less profitable.
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