Economists are predicting Alberta is headed for a massive economic slowdown amid plummeting oil prices. The province's vital energy sector is ratcheting down its exploration, drilling, and expansion as it faces sub $50US a barrel oil prices taking off from a record high of $147 less than 6 months earlier. Billions of dollars in Oilsands Mega Projects are being scaled back or cancelled due to the sharp slide in commodity prices, compounded by the global credit crisis.Today, oil closed at $47.11 NYMEX US; the Canadian dollar closed at an Interbank rate of $0.803.
Ten years ago today, oil fell to $9.93 bbl and the Cdn dollar was $0.649. Economists today are predicting, as OPEC could not control rapidly falling oil prices then, the possibility of oil reaching those 1998 lows is very real.
Ironically, only 3 years ago, in 2005, Alberta's finance minister Shirley McClellan's budget predicted a $7 billion surplus and forecasted nothing but roses and sunny skies ahead based on oil averaging $50 US a barrel. The Canadian dollar was $0.863 US.
Of course, the largest importer of Canadian Oil, the USA, though battered by Hurricanes Katrina and Rita, was an entirely different beast in 2005.
Oil may be headed to $25 but will it stay there? It took a global financial crisis with implications similar to the Great Depression to humble the energy bulls; not a 'bubble' of speculation bursting. This commodity alone is not alone in its bottom breaking plunge; every asset available has suffered from the economic turmoil.
If the global economy recovers, which it always does, energy will roar its way back simply because it requires energy to do anything. You need energy and massive amounts of it to build the roads and bridges in Obama's great infrastructure plan; you need massive amounts if energy to build new greener alternative energy; you need energy to solve the global hunger issues.
When will oil recover nobody knows: it could be by Q2 next year or it may take 10 years. But, 4 of the top 7 oil producers (Russia, Mexico, China, and the United States) will run out of oil reserves within the next 10 years, I am sure oil will rebound sooner than later.