A day after General Motors announced it would be shuttering its plant in Oshawa, Ont., the president of Canada’s largest private-sector union warned that the country’s most important industry was on the brink of collapse.
“GM is on the cusp of complete disinvestment in Canada and that will lead to a catastrophic end to Canada’s most lucrative export industry,” Jerry Dias, president of Unifor, told reporters after an emergency meeting with Prime Minister Justin Trudeau.
While the plight of Oshawa’s workers garnered sympathy in Alberta, Mr. Dias’s characterization of Canada’s economy was met with scorn: The country’s energy industry is nearly six times larger than the auto sector and is the most valuable export. Auto manufacturing and the oil industry, both laced with emotion, were sent on a collision course
During a tour of Ontario the next day, Alberta Premier Rachel Notley expressed sympathy for the 2,500 workers in Oshawa who will soon be unemployed. However, she said her province is going through far worse and the situation is threatening to deteriorate further.
“Albertans know all too well the anxiety and the stress that families in Oshawa are feeling right now with GM’s announcement this week,” Ms. Notley said as she spoke about the need for new pipelines to ease her province’s economic woes. However, she added: “We won’t build a national economy on double standards."
Alberta is still feeling the effects of a recession that clobbered the provincial economy and led to the loss of more than 120,000 jobs. However, Ms. Notley and others decried a perceived lack of compassion as the province’s energy industry has been sideswiped in recent weeks with near-record low oil prices and fears of a new recession.
Sandip Lalli, the head of the Calgary Chamber of Commerce, said she was asked during a recent visit to Ontario whether Alberta's oil industry was going the way of Atlantic Canada's beleaguered fisheries. She said the federal government has not done enough to help her province’s economy.
“We need solutions, not sympathy,” Ms. Lalli said. “Why we are not spoken about in the same context [as the auto industry] when they discuss the national economy, I don’t understand. I really don’t.”
Over the past two months the price gap between Alberta crude and global prices for oil widened considerably as a growing amount of Canadian oil has been stored in tank farms waiting for space on overloaded pipelines. The price of a barrel of oil from Alberta has sat around US$10 in recent weeks, US$40 less than that paid to other producers. The price gap, which Ms. Notley says costs the Canadian economy about $80-million daily, has been blamed on the inability to build new pipelines and refinery shutdowns in the United States.
“This is not happening by accident,” Ms. Notley said. “Canada willfully holds Alberta’s economy – and therefore Canada’s economy – hostage. And it has done so for a very long time.”
The auto industry contributes about $19-billion to the country’s economy each year while the energy industry accounts for about $120-billion, according to Industry Canada.
After tumbling from a peak of 132,000 energy jobs in October, 2014, at the start of Alberta’s recession, the province’s energy sector employed 99,997 people in September, according to Statistics Canada. Over the past 12 months the sector shed about 3,000 jobs – about the size of the work force at the soon to be closed Oshawa plant. Those labour statistics don’t capture the recent downturn in Alberta’s energy prices.
Ontario’s auto sector, including vehicle production as well as parts manufacturing, employed about 111,000 in September. That number has been largely flat over the past decade.
While both the energy and auto sectors are emblematic of their provincial economies, they have disproportionate impacts. Despite the similarly sized work forces, Ontario’s population is nearly 3½ times larger than Alberta’s.
The affect of the slowdown in Alberta’s energy sector is easiest to see in downtown Calgary, where the city’s unemployment rate of more than 8 per cent is near its highest point in decades. The city has a higher percentage of unemployed people than any other Canadian metropolitan area except for St. John’s.
Nearly 30 per cent of the office towers in Calgary, Canada’s second largest business hub, are currently empty. According to Mayor Naheed Nenshi, his city has more empty office space than Vancouver has total office space.
“That is just jaw dropping," said Jean-Sébastien Rioux, a professor at the University of Calgary’s school of public policy. "If you imagine a similar hollowing out of Bay Street in downtown Toronto no one would let that stand. The whole country would be jumping to the rescue. The federal government knows Alberta’s problem in theory, but I don’t think they really get it.
“This is a much larger economic catastrophe than 2,500 jobs in Oshawa.”
To help with its oil crisis, Alberta is now planning to purchase rail cars to move oil and Jason Kenney, the leader of Alberta’s United Conservative Party, has floated the idea of government-mandated production cuts. Ms. Notley is expected to decide within days whether her province will look to manage the supply of oil.
Mr. Kenney said he places most of the blame for Alberta’s predicament on the federal government. Despite Ottawa’s $4.5-billion purchase this summer of the Trans Mountain pipeline linking Edmonton and Vancouver, he said Ottawa has yet to take Alberta’s economic crisis seriously.
“With Oshawa, at least symbolically, the federal government jumped to the alert with emergency meetings, great expressions of concern and scouring the policy horizon for solutions. Meanwhile we’ve had the equivalent of 50 Oshawas in Alberta over the past couple of years and the response is what most people here read as condescension,” he said. “This is a five-alarm fire.”
Following GM’s announcement that it will shut its Oshawa assembly plant by the end of 2019, the federal government quickly said that it was looking at all options to mitigate the economic impact on Ontario’s economy. Along with the plant shutdown, there is a risk of closings at parts manufacturers rippling across Southern Ontario – a part of that province that has not fully recovered from a slump in manufacturing about a decade ago.
Despite the dire economic data, Alberta’s economy still has a lot going for it, according to Trevor Tombe, an economist at the University of Calgary.
“There is a lot of pessimism in Alberta. People think the economy as a whole is bad, but that’s just not the case. Alberta’s economy is still the strongest in Canada. Full stop,” Prof. Tombe said.
Albertans, on average, are younger and paid more than any other Canadians, and more Albertans are working as a percentage of the population than anywhere else in Canada. “We’re still in the top position in Canada, but the gap between us and the rest of the country has shrunk,” Mr. Tombe added.
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