Oil price decline will lead to hiring slowdown, economist says
The Alberta government could find itself faced with some tough choices in light of the recent drop in oil prices, an economist says.
Oil closed at just under $66 U.S. per barrel Friday — the latest drop in a months-long decline that has seen prices decrease by about 35 per cent since the summer.
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While the lower prices have many consumers breathing a sigh of relief, the provincial government and oil companies are likely taking a deep breath for the challenges ahead.
"The Alberta provincial government is going to see fewer royalties coming into their coffers," said Todd Hirsch, a chief economist with ATB Financial.
"That's going to mean some tough decisions for the provincial government, I think, in the 2015-2016 budget, and also industry — the energy industry. And in Alberta, that's the dog that wags an awful lot of tails. They're going to feel a pinch with these lower prices too."
Hirsch says some oil companies may start looking at layoffs and the province will have to figure out how to adjust to lower oil revenues until at least late winter or early spring when prices could rebound.
He says even those companies that don't do layoffs will likely slow down their hiring in the oil patch to adjust to the lower prices.
Hirsch says some of the pain from the low prices is currently being buffered by the softer Canadian dollar, which acts as a buffer for oil prices, which are in U.S. currency.