It’s the way you feel after downing one too many Singapore Slings the night before: after years of binging on high oil prices, Canada’s energy sector is experiencing the mother of all hangovers.
For investors, the headache is about as bad as it gets. From $106 (U.S.) a barrel less than a year ago, West Texas Intermediate crude (the benchmark grade in North America) plunged to a little over $42 a barrel, taking the share prices of Canadian oil and gas companies with it. Sure, things have bounced back a bit since—but so does every drunk who hits the floor. A barrel of black gold will currently set you back a hair over 50 bucks: an improvement, to be sure, but with a slew of shale oil, oil sands, and conventional plays continuing to pump the stuff out of the ground, nobody expects the party in the patch to resume anytime soon.
Naturally, such news has had a dramatic effect on the men and women who run the place. The big names in Canadian energy—Suncor, Husky, Talisman, Nexen, ConocoPhillips—have all sent hundreds of workers packing this year. With up to $23-billion in industry projects expected to be cancelled in 2015, they’re likely to have quite a bit of company.
The rest of the country is suffering as well. In its business outlook survey for the most recent quarter, the Bank of Canada noted business confidence has taken a turn for the worse—businesses across a broad range of industries are expecting lower sales, leading to caution on hiring and reinvestment.
Even politicians are feeling the pain. Alberta’s Progressive Conservative government estimates the dearth of energy royalties has blown a $7-billion hole in the provincial treasury; in response, they’ve called a snap election in an effort to seek a mandate for an austerity budget that includes tax increases.
In most things, the road of excess leads to the palace of wisdom: eventually, we come to understand the bigger the binge, the higher the price to be paid the morning after. Except when it comes to oil. No matter how catastrophic the crash, we keep going back to the wellhead, looking for the easy money.
Will we ever tire of it? Will we ever learn to put some of our earnings aside? Will we make an effort to open other revenue streams, to diversify the economy, to educate workers instead of shuffling them from high school to the rig floor? Will we ever wake up from our commodity dependence and swear: never again? Ask us when this damn headache finally clears.