Oil price plunge, trade wars drive drilling land sales down in Alberta
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The average price paid to lease oilsands lands for development tumbled to C$771 per hectare this year, according to provincial data. That's down 18 per cent from last year's average, which was the highest since 2007. For lands outside of the oilsands, the price has fallen 25 per cent.
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The slumping land prices are an early sign the Canadian drilling boom spurred by last year's completion of the Trans Mountain pipeline expansion may be coming to an end. With the Trans Mountain project giving producers almost 600,000 barrels of new daily shipping capacity, drillers increased output and snapped up new drilling sites, sending land prices to multidecade highs in 2024.
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But the twin shocks of Trump's global tariffs and OPEC+'s faster-than-expected production increases have sent oil prices tumbling to four-year lows in recent weeks, sapping drillers' appetite for new production sites.
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'Canada is not immune to the world's oil price pains,' said Trevor Rix, head of the Canadian oil and gas research team at Enverus.
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The softening in Canada's oilpatch mirrors the situation in the U.S., where drillers are retrenching and some executives are saying shale production has likely peaked.
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But Canada's producers are expected to keep ramping up output in the years ahead. For oilsands producers, lower oil prices can be countered by increased volumes, and a new liquefied natural gas plant in British Columbia will encourage drilling in oil-rich areas of western Canada, Kevin Birn, chief analyst for Canadian oil markets for S&P Global.
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Not only is Trans Mountain not fully filled, the company is already looking to expand capacity on its system. Enbridge Inc. is also working to add 150,000 barrels of daily capacity on its Main Line in the coming years.
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Oilsands output will grow by about 500,000 barrels a day to 3.8 million barrels a day by 2030, according to S&P Global Commodity Insights. Much of the new oil is likely to flow through Trans Mountain to the Pacific Rim, and it may be matched by growing volumes of natural gas as Canada's first major LNG terminal is slated to start later this year.
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Winnipeg Free Press
26 minutes ago
- Winnipeg Free Press
August recess can't hide tensions ahead for Congress on spending and Trump nominations
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Vancouver Sun
an hour ago
- Vancouver Sun
Merit expands skin-care offering with first facial cleanser
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an hour ago
Why Canada's economy is showing resilience in the face of U.S. tariffs
Despite tariffs piling up over the past few months, economists say there are few signs of economic collapse — though Canada's economy is starting to show cracks. TD Bank economist Marc Ercolao conceded it's a bit of surprise to see the economy holding up against a massive disruption from Canada's largest trading partner. Many months ago, ourselves — as well as other economic forecasters — had an outlook for a much weaker Canadian economy. Obviously, that isn't manifesting now, he said in an interview. We are avoiding the worst-case scenario. Last week, Bank of Canada governor Tiff Macklem said Canada's economy is holding up under the weight of U.S. tariffs with some resilience. Just a few days later, U.S. President Donald Trump added 35 per cent tariffs on Canadian goods to a running tally that includes hefty duties on steel, aluminum, automobiles and, more recently, semi-finished copper. On Thursday, Statistics Canada gave a glimpse at how the economy wrapped up the second quarter of the year when many of those tariffs came into full effect. The agency sees a couple of small contractions in real gross domestic product (GDP) by industry in April and May, but its flash estimates show the economy rebounding somewhat in June. If those early readings pan out, Statistics Canada said that would be good enough for flat growth overall on the quarter. Some of those results are distorted by volatility — businesses rushing to get ahead of tariffs boosted activity in the first quarter, and that's giving way to weakness in the second quarter, for example. It's still hard to pinpoint exact impacts tied to tariffs, Ercolao said, but a broad trend is emerging. What we can say over the last six months or so is that economic activity is somewhat flatlining. 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But it is growing and we expect that to continue through the third and fourth quarters. Last week, the Bank of Canada kept its policy interest rate unchanged at 2.75 per ce nt in a third consecutive decision. WATCH | Bank of Canada's governor gives reasons for holding the bank rate steady: If the central bank were panicked about the Canadian economy's ability to withstand U.S. tariffs, Ercolao argued it would likely have lowered that rate. The past week's GDP readings were good enough for BMO to raise its outlook for the third quarter into positive territory. Forecasters at the bank now expect Canada will avoid a technical recession this year. BMO chief economist Doug Porter said in a note to clients Friday that Ottawa's personal tax cut at the start of the month and robust demand for domestic travel amid the trade war will boost the economy this quarter, as will the less-dire sentiment around economic forecasts. Some other forecasters continue to pencil a tariff-induced recession into their outlooks. In the Bank of Canada's monetary policy report released alongside the rate decision, it outlined one scenario for the economy assuming the tariff situation remains largely status quo. Canada avoids a recession in that outcome. Growth in 2025 and 2026 remains overall positive, but half a percentage point lower than it would have been without the weight of tariffs. Time to adapt, mitigate negative impacts Macklem told reporters the Bank of Canada would expect the economy to keep growing even with today's tariffs, but it'll be on a permanently lower path. Unfortunately, the sad reality is that tariffs mean the economy is going to work less efficiently. Porter said in his note that the actual impact of Trump's new 35 per cent tariff on Canada's economy could be less than the headline figure suggests. Because of a carve-out for Canadian exports that are compliant with the Canada-U.S.-Mexico Agreement (CUSMA), BMO sees the effective U.S. tariff rate at roughly seven per cent under the new duties, less than a percentage point higher than it was before Friday. But with CUSMA up for renegotiation in 2026, Porter said that 35 per cent tariff rate could loom as a cudgel over negotiations — taking full effect if the trade agreement expires without a new deal in place. Enlarge image (new window) Tracking the trade war between the U.S and Canada. Photo: CBC / Wendy Martinez, Graeme Bruce The Bank of Canada published a separate escalation scenario this week that would see the United States remove Canada's CUSMA exemption as it ramps up global tariffs. Real GDP would drop an extra 1.25 per cent by 2027 in this more severe case; Porter said that this outcome would be serious for sure, but far from disastrous. Ercolao said much of the tariff doom and gloom earlier in the year was tied to the speed at which those import duties would be imposed. But the on-again, off-again nature of U.S. trade restrictions to date has given businesses time to adapt to the new way of doing business and constant delays in implementation, he said. If we go back to when Trump began his presidency, had he went 100 per cent on his tariff plan right away, we probably would have seen a deep economic contraction just because it would have been so sudden, Ercolao said. Now we've been afforded that time to at least try to mitigate some of the negative impacts from what these tariffs were expected to do to the Canadian economy.
