Low oil prices hurt energy and manufacturing sectors

By Gil McGowan, AFL Staff

The Alberta economy is healthier in many ways than it has been for more than a decade – but at least a few storm clouds are gathering on the horizon.

Despite reassuring words from powerful people in both government and business, it appears that low oil prices are starting to have a negative impact both in the oil patch and in Alberta's manufacturing sector.

Prices for crude oil have dropped from over $17 (US) per barrel last year to less than $13 per barrel today.

One of the results of this trend is that drilling activity in Alberta has slowed considerably. The number of drilling rigs active in the province plummeted from 352 in March to 116 in April.

April is traditionally the slowest month for drilling activity, but this year's numbers are still noticeably lower than last year's. In April 1997, there were 189 rigs working around the province.

The reduction in drilling activity has also had a significant impact on Alberta's manufacturing sector. Businesses that manufacture goods for use in the petroleum and coal sector saw their shipments decline by 22.4 per cent in the first quarter of the year due to lower prices and reduced demand.

AFL president Audrey Cormack says that the decline in drilling activity and petroleum-related manufacturing "should set off alarm bells" with leaders in both government and the business community.

"Our provincial economy is not quite as dependent on oil as it was ten of fifteen years ago. And the slide in oil prices is being compensated to a certain extent by increasing prices for natural gas," says Cormack. "But a collapse in crude production is still going to hurt. We should be making contingency plans for dealing with a long-term price drop."