Economists say Alberta's oil production cuts will dent Canada's 2019 GDP growth

Economists say Alberta's oil production cuts will dent Canada's 2019 GDP growth

The provincial government is implementing a short-term reduction in oil production beginning in 2019 in an effort to address the oil price differential that's affecting Alberta.

There will be a 10,000-barrel-per-day exemption to ensure small producers are not hurt disproportionately.

"Every Albertan owns the energy resources in the ground, and we have a duty to defend those resources", Notley said in a statement. This is especially true if companies with their own US refining capacity, like Husky Energy Inc., Imperial Oil Ltd. and Suncor Energy Inc., decide to squeeze their own workers till the pips squeak to punish the government for reducing their profit expectations for the greater good.

The curtailment is seen as a way to reduce volatility and narrow the price differential by at least $4, adding an estimated $1.1 billion to government revenue for 2019-20.

Calgary-based Cenovus climbed as much as 13 percent in Toronto and Canadian Natural Resources gained 16 percent, while Devon Energy Corp., a USA oil company with a presence in Alberta, rose as much as 8 percent in NY.

Members of the oil industry, meanwhile, were split Monday on whether production cuts are a good idea. Notley thanked them both in her speech. The province estimates 25 producers will have to impose cuts.

Reaction to the curtailment from United Conservative Party leader Jason Kenney and Alberta Party leader Stephen Mandel was swift. "I will never stop fighting for Alberta".

Economists say Alberta's oil production cuts will dent Canada's 2019 GDP growth

While praising her main opponents in the Alberta legislature, Notley put the blame for the current state of affairs right where most Albertans seem to think it belongs: On the federal government for not approving the pipelines Albertans have now persuaded themselves will solve all their economic problems.

About the only dissenting voice has come from Canada's integrated oil companies, whose refineries have been benefiting from the cheaper feedstock.

Similarly, while oilsands giants like Cenovus Energy Inc. and Canadian Natural Resources Ltd. will likely be happier, it's far from clear whether this will translate into anything that helps the NDP's political circumstances.

"We've got challenges with respect to pipelines, we've got challenges with respect to rail and now we've got challenges with respect to our demand market", Allan Fogwill, chief executive officer of the Canadian Energy Research Institute said at a presentation in Calgary Wednesday.

A wider-spread collapse in oil prices could wash away much of the gains from Alberta's production cuts, several analysts said Monday.

And there is no sign whatsoever that any method developed to ship Alberta oil - whether in the form of rail cars, new pipelines or rehabilitated old ones - will not eventually be used to its fullest capacity, with predictable impact on global climate change.

However, it was Notley's assurances that a decision on curtailing output was coming soon that helped boost heavy Canadian crude prices by 49 percent last week. Western Canada Select (WCS) has plunged below $15 per barrel, representing a discount to WTI that has hovered at around $40 per barrel. The grade's discount to USA benchmark oil prices widened to $50 a barrel last month, also a record. Off-topic, inappropriate or insulting comments will be removed.

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