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Oil price woes a 'serious problem' for Canadian economy, says Notley

Alberta's premier believes the low price of crude has become a serious problem for the country's economy, but says there's a lack of agreement around the sector on the idea of government-mandated output cuts.

Alberta premier believes quick action needed but says calls for mandatory production cuts lack consensus

'The [price] differential is obviously a very, very serious problem,' Premier Rachel Notley told reporters on Thursday. (CBC)

Alberta Premier Rachel Notley says the low price of western Canadian crude has become a serious problem for the country's economy, adding her government is "furiously" seeking solutions.

But while the province and the oilpatch explore their options, Notley said there's a lack of agreement around the sector on the controversial call for her government to mandate temporary production cuts.

Though the province has an obligation to look at everything, she said, they also want to explore solutions where they might find more consensus with similar results.

"The [price] differential is obviously a very, very serious problem for the energy industry here in Alberta and, quite frankly, for the economy across this country," Notley told reporters on Thursday.

"We don't want [oil] racing out of the ground at $10 a barrel. So what we need to do is we need to find a way to get at that differential and, as I've said, there are a suite of options that are in front of us right now."

Cenovus Energy CEO Alex Pourbaix, among others, has called for the Alberta government to mandate temporary production cuts to help correct what he's termed an 'emergency.' (Jeff McIntosh/Canadian Press)

The price of Western Canadian Select closed at $13.46 US a barrel on Thursday. Meanwhile, the American benchmark price, West Texas Intermediate, closed at $56.49 US.

"We need to work very, very quickly to address it," Notley said. "We're going to have conversations and discussions with all the players about the most effective way to move forward."

Notley suggested there would be some answers "within weeks and perhaps sooner."

The province has been pushing Ottawa to support more crude-by-rail shipments. Last week, the province sent a written business case to the federal government on a proposed strategy.

"There's a range of options for partnering with the federal government, but we are quite committed to being able to provide some kind of solution on a short-term basis as it relates to rail," Notley said.

Western Canadian oil prices crashed in September because of a backlog of oil in Alberta.

Oilsands production has increased throughout the year, but export pipelines are full and several refineries in the U.S. that process heavy oil from Alberta, shut down for maintenance.

Those refineries are coming back online but experts think low prices for Canadian heavy crude could persist into 2020. 

One estimate pegged the cost to Alberta's energy sector at $100 million a day. 

Richard Masson, an executive fellow at the University of Calgary's School of Public Policy, said the provincial government will be motivated to find a solution quickly. (Anis Heydari/CBC)

The situation has spurred Cenovus Energy's CEO Alex Pourbaix, among others, to call for the Alberta government to mandate temporary production cuts to help correct what he's termed an "emergency."

But other companies — including Suncor, Husky Energy and Imperial Oil — believe the market is working and the government should not get involved in production cuts.

Richard Masson, an executive fellow at the University of Calgary's School of Public Policy, said the provincial government will be motivated to find a solution quickly.

He said the provincial and federal governments are likely losing out on tens of millions in revenues every day.

"We're losing, as a province and as a country, so much money right now by selling our product at way-below-market prices," said Masson, who is also a former head of the Alberta Petroleum Marketing Commission.

"Finding a way to to balance the market quickly is going to be in the interests of all the producers and even for the refiners. They need to make sure that the producers don't end up in financial distress.

"This is an unprecedented situation we're in."