The long run looks good for Alberta

THINK OUTSIDE THE BOX:  While the prospect of cheaper oil today may not be ideal for Alberta’s producers, oil sands investment should still remain profitable in the long run.

In late October, Goldman Sachs’ US$75 oil prediction took the media by storm. Since then, oil has been the topic of conversation, from news headlines to dinner parties. And while the current plight of oil is especially significant for our province, the Canadian Energy Research Institute (CERI) suggests in its November briefing paper that Alberta’s oil producers have every reason to be optimistic.

CERI forecasts oil sands production numbers, predicts prospective GDP and offers a snapshot of Alberta’s direct employment from the oil sands in its paper titled, Canadian Impacts of New and Existing Oil Sands Development in Alberta.”

The Institute projects that oil sands production will swell from 2.0 million barrels per day (2013) to 5.2 million barrels of oil per day by 2030. Over that period, Alberta’s total GDP is expected to rise to nearly $3.5 trillion. As a result of increased production, direct employment in Alberta’s oil sands is expected to continue growing at a vigorous rate; 146,000 jobs currently to over 256,000 jobs in 2024.

The institute also predicts that oil sands royalties will grow threefold over the next decade, from $4.4 billion in 2013 to $18.2 billion in 2023. Cumulatively, total royalties collected will exceed $600 billion over the next 25 years. So while the prospect of cheaper oil today may not be ideal for Alberta’s producers, oil sands investment should still remain profitable in the long run.

Nick Ford • Economist    November 19, 2014

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