Oil prices bad news for slowing Saskatchewan oil sector
Drilling slows as prices continue to fizzle
Another drop in oil prices isn't doing any good for the currently sluggish Saskatchewan oil industry.
Oil prices dropped to a six year low this week, prompting more concern for those involved with the oil sector.
Last year, there were 83 drills operating in the province. This year the number of rigs is down to 31, which is less than half.
Brian Zinchuk, editor of Pipeline News, says a big worry adding to the slump is that companies aren't drilling new wells. He says drilling drives everything in the oil industry, and if that's not happening now, production will take a hit in the future.
"You don't do anything unless you drill it first," Zinchuk said.
Consumers feel the pinch
The low oil prices are coming back to impact the consumer, according to Greg Poelzer, executive chair for the International Centre for Northern Governance and Development.
"It hits your pocket book, so there's less money to be spent in other sectors of the economy," Poelzer said.
A lot of them are telling me know that this is starting to look like the 1980s.- Brian Zinchuk
Consumers are indirectly impacted as well, as transportation costs rise. That results in an increase in prices for goods on the store shelf.
All of this is coupled with job cuts to workers in the oil industry, creating increased unemployment and even less money to spend.
"You're going to see layoffs in the oil sector. They've already begun, and those are likely to continue for the foreseeable future," Poelzer said.
Length of slump a concern
As for the severity of the slump, Zinchuk says it's the length of it rather than depth that's a concern. He says that although it's been almost a year since oil prices started dropping, there is no end in sight.
"It's looking like it's going to be going down before it goes up."
Zinchuk said the people he's spoken to in the industry haven't seen such hard times since 1986, when some of them nearly lost their business.
"A lot of them are telling me know that this is starting to look like the 1980s," he said.
Still, Zinchuk is confident the industry will recover, but that doesn't mean the province will come out financially unscathed in the short-term.
Poelzer agrees, saying if oil drop below $40 per barrel, it could greatly reduce provincial government revenues.
In a statement, the province's Ministry of Finance said it'll release a financial update at the end of this month.