Energy crisis continues as oil rig activity drops 50%

The number of actively producing oil rigs has gone down significantly and that is, and that is cause for concern.

According to some numbers, oil rig activity has seen a drop of 50% from this time last year.

This huge slowdown in production appears to be caused by dismally low oil prices and the differential price between Canadian and American oil.

Due to a lack of pipelines, Canadian oil is often sold to the United States, at a discount, in order to get it to foreign markets. In the past, this discount was simply absorbed by the producers, but with the current trajectory of prices, some experts suggest shutting down production might be the best option

As The Post Millennial reported in November this discount costs the Canadian economy over $80 million a day.

What’s perhaps most distressing is not that the number of active rigs is down from 136 last year to just 70 this year, it’s that in 2012 there were over 710 active rigs in Canada. That represents a difference of over 90% less rigs active from 6 years ago. This statistic shows a trend downward for Canadian energy output.

Overproduction by OPEC and a move towards energy independence by the United States are commonly perceived as the reasons for the low oil prices, but the deep oil discount, recently as high as $50 per barrel, is caused by a lack of alternative markets other than the United States.

Richard Masson, an industry expert interview by CBC, said that decreased activity in the drilling sector will have a “ripple-effect” through the Canadian economy, and will hurt even more into the summer when less drilling goes on

The Canadian economy depends on a strong energy sector, and while Canada is closing rigs, the US is hitting record highs of production, and the Gulf states are expanding production as well, the era of cheap oil may not be over yet

2018 was perceived by many as a crisis year for Canadian energy, and without an increase in prices or new export potential for Canadian energy 2019 may shape up to be an even worse year.