Falling oil and gas prices: Alberta's pain

While the rest of Canada is loving the low price of gas at the pumps these days, Alberta is keeping something of a nervous eye on its economic gauge.As the oil and gas industry in the province goes, so does the economy. And over the last several years, things have been humming along famously. Job and wage growth have led the country, and the housing market in Alberta has benefited handsomely.But as oil’s recent plunge continues, with gas prices hitting four-year lows and expected to boost consumer spending across Canada, Alberta’s housing market could take a hit from a prolonged slump.“Anything to do with oil prices or demand can affect the Alberta economy. It’s one of the things that’s supported the economy there to such a strong extent in recent years,” Bob Dugan, chief economist at Canada Mortgage and Housing Corp., told New Home & Condo Guide.“Alberta has led the country in terms of job creation, economic growth, and they have attracted a lot of migrants to the province, and that has put a lot of pressure on the housing market there. We’ve seen tremendous growth in MLS sales and housing starts.”If oil prices were to drop dramatically, Dugan adds, it could have an impact on Alberta’s economy, causing net migration to slow. “If the job opportunities aren’t there, it could lead to slower housing markets.”CMHC included something of a cautionary note in its recent housing outlook for the province.After two years of double-digit per cent increases, housing starts in Edmonton are moderating in 2014, CMHC says. In Calgary, consecutive years of elevated net migration and job creation continued to support activity in the resale market in 2014, but these factors are expected to moderate next year, which will lead to a more gradual increase in sales for 2015 and 2016.Another factor that could affect oil and the economy in the province is the proposed Keystone XL pipeline, which would stretch more than 2,700 kilometres from Hardisty, Alta. to oil refineries in Texas. The U.S. Senate rejected a proposal for the $8-billion project in November, but another vote in January is expected to pass.“Infrastructure like the pipeline would certainly help to export Alberta’s energy resources and support economic growth,” Lai Sing Louie, CMHC regional economist told New Home & Condo Guide. “Government decisions can change with time. The recent decision was very close – meaning there is substantial support for a pipeline.”