The plummeting price of oil may have a big impact on the Canadian and B.C. economies in the next year or two.
Some of that will be positive, but it is likely that it will be mainly negative.
The price of gasoline (but not diesel fuel) is falling, and that means more money in the pockets of consumers. This helps them meet other obligations, such as rent, credit card bills and child care. If the provincial and regional governments can avoid the temptation to tax this newly-found money out of people’s pockets, the fall in prices will be a good thing.
One other bright spot may be a boost in exports if the dollar remains low.
The negative implications are widespread. There will almost certainly be a fall in economic activity, and particularly jobs. Many well-paying jobs are concentrated in the oilsands. Many Greater Victoria residents either work there or work for companies that supply the oilsands.
There will be no new construction projects in that area, as long as oil prices stay at the $60 to $70 per barrel level. It simply costs too much to produce oil from the oilsands.
As economic activity is reduced, it impacts taxation to the federal and provincial governments. Alberta, Saskatchewan, Newfoundland and B.C. all are dependent on revenue from oil and natural gas. In B.C., one LNG project has been delayed by the falling price of oil, as Asian natural gas prices are tied to oil prices.
More could be delayed or even cancelled. It is significant that none of the major LNG players are ready to commit. A fall in economic activity likely means that 2015 will see much lower growth than anticipated, which won’t help the overall Canadian economy.