Oil price pain seeps into other sectors of Alberta economy

From airlines to beer-makers to wireless providers, withering crude prices have been a drag on businesses seemingly far removed from the oilpatch.

Airlines, retail, telcos all affected by oil downturn

The deep freeze in oil and gas is having a chilling effect on other sectors. (Jeff McIntosh/The Canadian Press)

From airlines to beer-makers to wireless providers, withering crude prices have been a drag on businesses seemingly far removed from the oilpatch.

"Sometimes — outside of Alberta, particularly — there's some skepticism or even some derision against the petroleum sector," said Todd Hirsch, chief economist at ATB Financial.

"Some people actually feel it's getting its comeuppance... But they need to realize that it has broader implications for the whole economy."

Todd Hirsch is the chief economist at ATB Financial. (CBC)

Troubled skies 

WestJet Airlines, based in Calgary, is shuffling around its schedules to reflect lower demand for flights to and from energy-focused destinations in Western Canada.

On a recent quarterly conference call, there was also talk of potentially deferring the delivery of new planes and returning leased aircraft that are up for renewal next year.

"It's had a dramatic impact on WestJet," aviation consultant Rick Erickson said of the crude downturn. "Demand is down across the country but nowhere near as much as it is in Western Canada."

Traditionally, a big portion of airline traffic had been oil workers commuting to and from site from elsewhere in the country, said Erickson. With projects on hold, those volumes have tapered off.

Westjet has cancelled or suspended a number of routes in Western Canada. (Darryl Dyck/Canadian Press)

Molson, Telus and Manulife

The crude downturn was even cited as cause for concern in the latest earnings for Molson Coors Brewing Co., which said on its quarterly call Thursday that beer drinkers — particularly in Alberta — are choosing economy brews over premium brands.

The oilpatch pain was also evident in the latest financial report from Vancouver based Telus. The company added just 4,400 postpaid wireless customers in Alberta during the second half of last year, a sharp drop from the net 50,000 it added in the same period a year earlier.

Insurer Manulife took a $250-million charge in the fourth quarter and a $876-million charge for 2015 as a result of a decline in its energy investments.

Retail pain

Data compiled by NPD Group, a research firm, paints a picture of how retail traffic has fared in different parts of the country in 2014 versus 2015.

Purchasing visits were down two per cent in Alberta and Atlantic Canada, while in the country as a whole, they were up three per cent.

The U.S. crude benchmark hit a high of around $108 US a barrel in mid-2014 and finished off 2015 below $40 a barrel. It's since depreciated further.

Thinking twice

Tough economic times cause consumers to scrutinize their discretionary purchases, said NPD Canadian retail analyst Sandy Silva.

All of a sudden those tried, tested and true guaranteed sales are not so guaranteed anymore- Sandy Silva, retail analyst, NPD Group

"Can we have that extra meal out or can I have that new dress or new pair of shoes?" she said. "I think it's just going to cause consumers to think twice."

The retailers that are in for the most pain are ones that sell workwear, like steel-toed boots or flame-retardant coveralls, said Silva.

"All of a sudden those tried, tested and true guaranteed sales are not so guaranteed anymore."

Low oil prices do benefit the economy in some ways, said CIBC chief economist Avery Shenfeld. Lower fuel costs are welcome, for instance.

But the bad outweighs the good, he said.

"Make no mistake — Canada is a major oil exporting economy and on balance it's a negative for the Canadian economy," said Shenfeld.

"That's made up for a deep negative from the oil-producing provinces and a modest positive for the rest of Canada."


To encourage thoughtful and respectful conversations, first and last names will appear with each submission to CBC/Radio-Canada's online communities (except in children and youth-oriented communities). Pseudonyms will no longer be permitted.

By submitting a comment, you accept that CBC has the right to reproduce and publish that comment in whole or in part, in any manner CBC chooses. Please note that CBC does not endorse the opinions expressed in comments. Comments on this story are moderated according to our Submission Guidelines. Comments are welcome while open. We reserve the right to close comments at any time.

Become a CBC Member

Join the conversation  Create account

Already have an account?