In any other part of the country, Canadians typically equate oil prices to the cost of gasoline for their vehicles and home heating. In Alberta, however, oil is an industry and the rise and fall of prices can create significant impacts on their everyday living.
Oil prices and the economy of Alberta are directly linked – when the prices go up, the province prospers and when the prices go down, the economy suffers.
These ups and down produce a rippling effect across the country as well. The national economy within Canada is affected by the economic growth or suffering of Alberta.
Here are some key ways that the price of oil matters to Albertans:
Higher Oil Prices Stimulate Economic Growth
When the price of oil increases, the oil industry maintains a steady rate of production and brings in more revenue from the sale of the oil.
This benefits the industry and the province in two ways:
1. A steady rate of production creates a need for steady employment.
2. An increase in revenue allows companies to hire more positions and increase wages.
In addition to the benefits of employment, higher oil prices attract more investors and lead to an overall boost in the national income. Ultimately, it can affect everything from the price of gas to employment rates.
Low Oil Prices Results in Lost Revenues
The downswing in oil costs is bad for the overall economy. A significant price drop in oil creates a drop in the value of the Canadian dollar as well as a loss of revenue for governments that depend on oil to fund its programs.
Oil companies also feel the effects of low oil prices and, in an effort to maintain their bottom line, are forced to lay off their workers. This results in job cuts and loss of income for families.
Increased oil prices negatively impact the cost of living
High oil prices aren’t always the ideal situation for Albertans – an increase in oil cost affects the manufacturing sector and the transportation industry.
Many commonplace products rely on oil and oil byproducts in the manufacturing process. An increase in oil prices results in an increase in the cost of these products.
Companies that transport goods from province to province also suffer from high oil prices. Much like in manufacturing, an increase in transportation costs creates an increase in product cost.
Overall, when gas prices go up, so does the cost of gas, groceries and petroleum-based products.
Finding a Balance
It’s a delicate balancing act between keeping prices high enough to make a profit but ensuring they don’t go low enough to necessitate job loss.
Unfortunately, control of oil prices isn’t completely in the hands of the Alberta government. Oil is an internationally traded commodity and prices are often set on supply and demand. The cost of oil can even be affected by natural disasters and political unrest.
The rise and fall of gas prices and their negative and positive effects are the very nature of the oil industry. In order to come to terms with the costs of oils, it is important for Albertans to understand how they are affected by oil prices.
