Alberta, which derives a quarter of its economy from the oil sands and other energy resources, is poised to grow at the slowest pace in five years as crude prices slump, ATB Financial’s Todd Hirsch said.
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The western Canadian province’s economy will expand by 2.5% to 3% in 2015, about half a percentage point less than this year, the bank’s chief economist said at an event in Calgary Thursday. The slowdown follows annual average growth of 4.6% in the past four years.
The West Texas Intermediate and Brent oil benchmarks extended losses to four-year lows Thursday after OPEC signaled it remains unwilling to reduce output to ease a supply glut. The decline of more than 30% from June highs for those crudes means that, while major oil-sands producers will probably sustain the development of projects, smaller ones may scale back investment, Hirsch said.
WTI, which closed at $74.21 a barrel on the New York Mercantile Exchange Thursday, will likely trade between $70 and $75 a barrel for the rest of the year and rebound to $85 to $90 next year, Hirsch said. About a quarter of oil-sands projects are at risk as prices fall, the International Energy Agency said Oct. 14.
While pressure from OPEC and surging supplies from a U.S. shale boom have led to the price decline, the global economy is not facing a crisis as it did five years ago, and rising demand will probably make room for a recovery next year, Hirsch said.
A growing population that demands increasing services and construction will help Alberta weather the energy rout and avoid the kind of economic contraction it faced in 2009, when oil trading as low as about $34 a barrel led the provincial economy to contract 4.1%, Hirsch said.
Alberta expanded faster than the Canadian economy in all but one of the last 10 years.