How do you describe, comment on, or event predict an outcome of what we are going through right now? We have no evidence to rely on in which to forecast. History has been plagued with pandemics; however, never has one been so widespread during a time where established supply chains have been so globally integrated. Here is what we know.
Energy Sector Woes Continue
A 2016 Macleans’ article, ‘Life at $20 a Barrel: What the Oil Crash Means for Alberta’, reminds us how long the Canadian energy sector has been struggling. Many oil companies would now welcome $20 a barrel. Western Canadian Select plunged to historic lows of less than $4!
With crude and diluted bitumen storage nearing capacity and waning demand, it’s easy to understand the record setting discounted price. Major energy sector players are slashing expenditures, while smaller players are hinging on the brink of collapse. Severe production cuts, extended shut-downs and massive lay-offs are likely to follow. We have yet to see all the fall out, and for some it feels like we are never going to see a recovery.
It’s now time for the U.S. and Canada to work together to develop a strategy that ensures North America’s energy sector remains viable. It is vitally important to protect this essential part of our existence.
Data
Data is changing daily. At the time of publishing this article it will be outdated. The outcome will depend upon a concerted global effort to curtail the spread of the COVID-19 disease and mitigate the economic impact.
On the Horizon
Interest rate cuts, quantitative easing, billions of dollars in Federal and provincial aid, relaxed lending requirements, delayed income tax filing, and deferred mortgage payments are expected to cushion the financial blow.
It’s hard to imagine what things are going to look like on the other side of this historical event. Our Provincial budget relies on $58/barrel oil – every $1 reduction in WTI translates to about $200M in lost revenues. Eleven percent of Canada’s GDP is derived from our energy sector, which funnels billions of dollars into federal revenue to distribute to the rest of Canada to fund healthcare and social services. With over a million Canadians applying for EI and many businesses screeching to a halt, there will be huge deficits for years to come.
A New Future
While it is hard to look at the silver lining in the cloud, while you are in the midst of a storm, there is always a glimmer of hope. We have the ability to weather this storm and come out of it with the capacity to make positive change. In the words of German philosopher, Friedrich Nietzsche, “That which does not kill us, makes us stronger.”
We are all stewards of this planet. We need to do a better job, or there will be no industry. I cannot finish this article without appealing to humanity to critically evaluate what we have done and how we can do things differently to expand global initiatives for the sake our survival.
Stay safe.