Here’s Why Canada’s Oil Industry Could Still Suffer in 2017
Canada’s Oil Industry Could Continue to Suffer in 2017, Higher Oil Prices and All
Nearly one-third of employers in Canada’s oil and natural gas industry are pessimistic. They expect 2017 to be another challenging year. Still, it would be difficult for 2017 to be worse than 2016: 65% of Canada’s oil and gas workers lost their jobs this year. That’s what a survey conducted by the Hays Canada recruitment firm says. (Source: “Canadian employers resilient, stable and ready to tread lightly into 2017 after a year of global economic turmoil,” Newswire, November 29, 2016.)
Approximately 28% of employers in Canada’s oil and gas industry expect to hire fewer people in 2017 than in this year. Only 15% expect to grow. Approximately half of them predicted stability, said Hays. Canada’s energy industry has experienced two tough years, which have broken confidence.
Some employers are hopeful that the worst is behind them. OPEC has agreed on production cuts. That means that oil prices are higher, while risks to the oil-producing countries of the Middle East (ISIS, disagreements between Russia, Saudi Arabia, and Iran, for example) abound. Both are always good for investment on oil production.
The optimistic argument about Canada’s oil industry is that the market has bottomed out. Still it’s hard to imagine how the current oil price hike to about $50.00-$54.00/barrel can fuel the oil sands of Alberta and Saskatchewan—among other Canadian oil deposits. The price is not high enough to support non-conventional oil production.
Indeed, the price might not be high enough to reverse the heavy job losses. The Canadian Association of Petroleum Producers estimates that at least 44,000 direct jobs have been lost in the oil and natural gas industry since the beginning of the crisis in 2014. (Source: “Alberta oilpatch optimistic after pledge to restrict global supply,” CBC, December 12, 2016.)
But the Canadian energy sector’s own ability to re-absorb workers is but one problem. The Hays survey also revealed that several energy company bosses feared that the recovery would be more difficult now. Many skilled workers have left Alberta to find jobs in other sectors. (Source: Newswire, op cit.)
In a separate report, AltaCorp Capital Inc of Calgary said Alberta energy companies were choosing to reduce jobs rather than earnings in an effort to limit costs in this period of weakness of raw material prices. (Source: “Less hiring planned after 65% of oil and gas companies trim staff, survey finds,” Calgary Herald, November 30, 2016.)
Oil and gas companies have eliminated about 29 percent of their workforce in the last two years. Average wages are expected to increase by a “nominal” rate of 3% or less, concludes the survey. Most expect to leave the current size of their workforce unchanged. (Source: Newswire, op cit.)