Oil at the first phase of separation from the sand at the Suncor oil sands processing plant.TODD KOROL/Reuters
Canada's oil industry saw the value of its exports drop by an annualized $40-billion as prices plunged from mid-2014 to this past February, the federal government said Tuesday.
In his first budget, Finance Minister Joe Oliver said the "dramatic plunge in oil prices has taken its toll on our economy" and will continue to have a net negative impact on growth, though there is a silver lining to the oil industry's pain.
The major impact was the loss of export dollars for the Canadian economy. In mid-2014, the value of Canadian crude exports was $100-billion on an annualized basis, or 5.1 per cent of gross domestic product. The stunning drop in prices cut the value of oil exports by $40-billion on an annual basis, even as volumes remained broadly unchanged.
Lower prices will reduce corporate profits, which will result in less investment and employment in the sector.
That impact was offset by lower fuel prices to consumers and a stronger U.S. economy. The decline in gasoline prices between mid-2014 and this February would save Canadians $12-billion over the course of a year, the government said. As well, the lower oil prices have helped keep consumer prices tamed. The Bank of Canada has responded by lowering its trendsetting bank rate, which reduce borrowing costs for households and businesses.
Based on private-sector forecasts, the government expects the U.S. benchmark West Texas intermediate to average $54 (U.S.) a barrel this year, rising to $67 in 2016 and $75 in 2017.
The government offered little help for the hard-hit sector, though it extended $80-million over five years in special funding for the National Energy Board for safety and environmental protection. That money will be fully recovered from industry.
It also targeted the nascent liquefied natural gas industry, which British Columbia hopes will build several export terminals on its coast. The Harper government previously announced its would extend accelerated capital writeoffs for the industry. On Tuesday, it announced it would extend the maximum length of natural gas export licences to 40 years from 25 to improve regulatory certainty.