As global oil prices PLUMMET, Canada braces for recession

Saudi Arabia and Russia are ostensibly attempting to wipe out North America’s oil production. Saudi Arabia in particular, who are well-adjusted to deal with low oil prices, are using tactics that is “essentially a declaration of war on US producers,” said the oil and gas expert Gregory Brew.

As a result of this, it is not unreasonable to foresee the collapse of many oil producing businesses in both Canada and the United States.

This crisis has come after a meeting between Russia and the OPEC countries where they could not reach a deal to cut the production of oil. This has triggered a price war between Russia and Saudi Arabia who are now competing for a larger share of the market.

This will directly impact North American oil companies who simply cannot compete with Saudi Arabia. As well as this, Canadian and American companies have gone into significant debt in order to expand their operations—relying on the fact that oil prices will remain at $50 to $60. Now, oil prices are in the $40 range, possibly sinking as low as $30—making the production of oil in North American unprofitable.

The most sudden consequence of this is that gas prices will fall at the pumps.

Alberta will have to bear the brunt of this crisis. Already, Alberta has suffered deeply from the prime minister’s perceived hostility over Canada’s oil crisis. Even before the decline in the price of oil, data concerning Alberta’s economic activity showed Alberta’s economic activity dropping as low as it has been since the 2015-16 recession.

In January of this year, for instance, Alberta saw a loss of 18,900 jobs stemming, almost entirely, from Ottawa’s inaction on pipelines.