Alberta’s New Normal: Lower Oil Prices and a More Diversified Economy

How would you describe the current state of Alberta’s economy?

I would describe Alberta’s economy as one that continues to gradually improve. ATB recently came out with our economic forecast and we are calling for real GDP growth of 2.7% for 2018 and then 2.3% in 2019. So, whether or not you use GDP growth as a barometer for the economy, it certainly is a good indicator for us. We believe that the return of the days of rapid expansion of the oil sands and extremely high oil prices is not on the horizon for Calgary and more broadly Alberta, but the good news is that the economy is growing again. Increasing economic diversification over the long term is an important piece of the puzzle.

“There are several sectors specifically showing growth in Alberta, including agriculture, agro-foods and tourism, transportation and logistics, and we are seeing positive signs in the tech sector.”

Trying to predict the future of economic growth is tricky even for the best economist, but we believe that continued modest growth is on the horizon for Alberta more broadly. However, this is a jobless recovery. So jobs in Calgary and in Alberta have not returned at the pace that we would have enjoyed pre-2014.

How does the oil and gas industry fit into Alberta’s economy going forward?

The energy leaders in Alberta, and Calgary specifically, have come to the realization of a new normal, where oil prices will not return to the highs of what we have historically seen. This new normal for Calgary’s oil and gas companies is to leverage technology, data and AI to improve their operational efficiencies to be competitive in a price horizon that is around $60-70. As a result, there is some feeling of concern that the high-paying jobs and the engineer jobs that we would have experienced in a rapidly growing energy industry will not return. So, economic growth feels sluggish for some, and particularly those who are still facing unemployment. Although employment has risen over the last year, the rate of improvement has been slow and unsteady and, specifically, the quality of the new jobs is somewhat in doubt.

“The new normal for Calgary’s oil and gas companies is to leverage technology, data and AI to improve their operational efficiencies to be competitive in a price horizon that is around $60-70.”

Energy for Alberta, and for Canada broadly, has historically been the growth engine of the economy and we now frame energy as the backbone of the Albertan economy. We therefore cannot undervalue the necessity to foster a strong energy economy in Alberta and Canada as a whole. We also shouldn’t view Alberta as just a traditional oil and gas provider but more broadly as a general energy provider. In that context, we believe that investing in cleantech and other renewables is important for the future of Calgary and Alberta.

There is a misperception that oil and gas companies are slow to adopt technology. I would say that the energy companies in Calgary, and more broadly Alberta, are rapidly advancing new technologies to ensure that they produce their product in a cleaner and more efficient way. They are adopting new technologies, using data and the Internet of Things (IoT) with these goals in mind.

How successful has the economic diversification of Alberta’s economy been so far?

Diversification is important within any entity, whether it is a provincial entity, an industry entity or a business entity. There are several sectors specifically showing growth in Alberta, including agriculture, agro-foods, tourism, transportation and logistics, and we are seeing positive signs in the tech sector. When it comes to diversification, some say we need to focus on building on our strengths and diversify energy, agriculture, products and services. Yet, others say we should expand and diversify into entertainment, artificial intelligence, technology and other emerging sectors.

How well is Alberta doing in terms of producing, attracting and maintaining talent?

With the explosive advent of technologies like AI, machine learning, robotics and automation, there is concern about the future of work. But we believe that Calgary, and Edmonton specifically, are becoming very well known in the AI ecosystem. The University of Alberta would be considered one of the top two in AI academia as an ecosystem that includes business and other investments. We believe Alberta is beginning to build its reputation and its brand for developing top talent out of our universities. The partnerships that universities are building with the business world continue to develop that top talent.

“The University of Alberta would be considered one of the top two in AI academia as an ecosystem that includes business and other investments.”

Alberta needs to continue to try and attract capital, whether that is venture capital, private equity or long-term patient capital. We need to continue to do our work to show the benefits of Calgary and of Alberta to Canada and more broadly North America and perhaps the world.

What is your vision for the future of Alberta’s economy?

Trade amongst jurisdictions, whether that is provincial partners or different countries, is important for any economy. The movement of goods, the creation of jobs, the investment of capital and the expansion of the economy based on positive trade is an important factor for Alberta’s economy. Given the high reliance of Alberta’s exports on trade with the US, free trade and the flow of goods into the US is crucial for the province.

I would use the term “cautionary optimism” for my sense of Alberta’s future economy because I think the uncertainty around trade is troubling. If trade tensions with the US worsen, then a slowdown in the economy of Alberta is almost inevitable.