Allan Dwyer, assistant professor of Finance at Mount Royal University’s Bissett School of Business, believes the current downturn has similarities to others in history. Photo by Wil Andruschak/for CREB®Now

Comparing Calgary’s current downturn to history

Calgary’s infamous boom-bust economy is at it once again.

Just as it did in the 1980s and late-2000s, economic conditions have once again turned sour.

But does this downturn feel different from those that came before?

Yes, says CREB® chief economist Ann-Marie Lurie.

In CREB®’s 2016 Economic Outlook & Regional Housing Market Forecast, Lurie notes that while some have tried to compare this year to the early 1980s – in terms of its perfect storm of low oil prices and high unemployment – the underlying conditions are, in fact, much different.

Between 1981 and 1985, average annual home prices plunged 20 per cent, with 20 per cent also the average five-year term lending rate. But Lurie forecasts a “less severe pullback” in home prices this time, with positive (if slowing) net migration also a mitigating factor, plus housing supply levels 35 per cent lower than they were in 2008 and interest rates at historic lows.

“For Calgary to see price drops comparable to the 1980s, the current economic downturn will have to last for an extended period of time,” said Lurie in the forecast.

Conference Board of Canada deputy chief economist Pedro Antunes, meanwhile, dismisses comparisons with the downturn in 2008/09. For one, this one is localized, he noted.

“The rest of the world isn’t feeling the same, and we don’t have a financial crisis (like 2008),” he said. “We don’t have a situation where there’s a complete drying up of access to capital.”

Allan Dwyer, assistant professor of Finance at Mount Royal University’s Bissett School of Business, believes the current downturn has similarities to others, including the one that gripped Montreal following the election of a Bloc Quebecois government in 1976, the Japanese stock market collapse of 1989 and ongoing issues in Detroit that climaxed with that city declaring bankruptcy in 2013.

Although the circumstances are different, all of these downturns share common elements, noted Dwyer:

• A sense of uncertainty still exists about Alberta’s first non-PC government in decades;

• Calgary – like Japan – went through a long period of “feeling of wealth” before circumstances changed; and

• The changes in automobile manufacturing that impacted Detroit could be compared to how new technologies in oil production – meaning “the way we produce the bulk of our oil is basically a dinosaur.”

For Alberta to get out of its current slump – something it took Montreal 15 years to recover, and arguably, Japan has yet to do so fully – Dwyer said the province must “adjust or adapt.”

“The Calgary market, the real estate market, employment levels – so (much) is tied to that idea of oilsands oil,” he said.

“We have to move toward this business of ‘tight oil’ and new type of technologies. We have to think about how we do oil and gas and energy. Is it just hydrocarbons? Or is it solar, renewables, tight oil, fracking … a whole portfolio of energy production so we maintain ourselves as an energy exporter, but not dependent on very expensive oilsands production.”

Antunes said if oil prices remain flat, he anticipates a “flat economy” for Alberta in 2016, with the Conference Board anticipating a 1.2-per cent provincial contraction in 2015.

“We do think that oil prices will come up to the $65-70 range over the medium term, which should make the industry return to profit or at least viability,” said Antunes.


  1. Alberta oil will be obsolete. Very uneconomical to produce compare to Some oil producing nations like Saudi, Iran, Venezuela Libya etc. Detroit kind of effect and predicament is just around the corner.

    • Lol@you Andre. Educate yourself on the industry before making broad statements like that. Also by educate I don’t mean regurgitate Greenpeace or David Suzuki propaganda. This is the thing with environmentalists, they can spout any unsubstantiated claptrap with impunity. Show us some facts and figures.

    • Oilsands costs are high because there was no driving force to reduce costs as profits were good at $100/bbl. The industry in Calgary is extremely innovative and employs some of the best minds in the world. We would be foolish to take the stance that we can’t reduce the cost of production through innovation and research and give up on such a vast resource. Green energy, although a likely near term source of government grants, etc, is barely break even in terms of energy production and profitability when you factor in costs of land, production, installation and operation. For example, look at Ontario’s wind farm fiasco, we should not head down that path in attempt to paint the same fascade. Lastly, many people are acting as if this economic downturn has just come upon us when, in reality, oil prices started falling in July 2014, layoffs started then. So when we talk about an extended period of time, please take into account it’s already been a year and a half and will likely be at least a year more, if not 5 or even 10. If this is the case, geologists, geophysicists and engineers will have retired, changed careers, or moved away, and we will not have many graduates coming out of school in these disciplines. With Canada’s largest contributer to the nation’s GDP at $131 billion/yr distantly followed by the auto industry at $61billion/yr, the economic woes extend beyond Alberta. I have to disagree, this is not a local phenomenon, OPEC members such as Venezuela, Nigeria, Ecuador, etc are under extreme financial pressure, Russia is reeling, although they will never admit it and the Saudi’s are cashing in their foreign currency assets mean they’re feeling it as well. Sure they are the low cost producer; however, the money they have to spend to maintain their social programs after the Arab Spring have them tapping their monetary reserves. This is a huge battle over marketshare and countries (or simply put: the US versus OPEC) are going to see who blinks first. It may get worse before it gets better, but the decline in US shale production will fall off sharply, likely by end of Q2 and we should see some relief for oil prices. Although there is a glut of oil, it is not a massive oversupply and the drop in oil prices has been overdone if solely based on supply-demand metrics. Iran may be able to export some oil, but why would they start pumping at full capacity under these prices? And who is going to invest in that country with such political instability, compounded now with tensions rising between them and the Saudis? With both very inexperienced provincial and federal governments, there is uncertainty whether investment dollars are going to be best spent in Canada once prices do recover.

  2. The people who governed Alberta for the last decades (mainly the Conservatives) never thought of building a diversified economy that does not depend only on oil.The oil boom in Alberta is over forever unless a big war breaks out which would probably help the price to go up again.


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