Plummeting price of oil means jobs for people here could be put on hold or lost

We have all witnessed the effect of the dramatic price decline in oil. The gas pump tells us each time we visit a gas station.

We have all witnessed the effect of the dramatic price decline in oil. The gas pump tells us each time we visit a gas station. And that is positive for a lot of us consumers.

Many might ask: what is going on?

Contrary to the many conspiracy theories that arise at such times as these, the answer is really very simple and shows starkly the role of supply and demand. Right now, there is more oil on the market than there is demand for it. This has happened because of three main events:

1. New supplies of oil from the shale revolution in the U.S.

2. The decision by OPEC, led by Saudi Arabia, to refuse to reduce supply.

3. Demand is shaky as a result of a slow down in the increase of economic activity in China, anemic growth in Europe, and the U.S. having access to shale oil in its own country, as well as a constant supply from our country.

Saudi Arabia has the largest oil reserves in the world. It has developed a lot of cheap oil with substantial markets. It sees shale oil as a threat to its markets (and perhaps some other emerging sources like the Gulf of Mexico) and is willing to take some short term pain (its own budget needs at least $60-80 barrels of oil to be balanced) for what it sees as longer term security for its markets.

It remains to be seen whether they will hold to this strategy or whether there is a price that will trigger some change to this policy. Other OPEC nations, like Iran, Iraq and Venezuela, with higher costs to produce oil, will be negatively affected. As will Russia, a big producer.

The effects have already been felt in Canada. Offshore Newfoundland has already seen a delay to one project and the number of exploration rigs being used is slowing down in both Alberta and the U.S.

And US Steel has just closed two steel plants that manufacture parts for oil exploration.

Alberta and Newfoundland budgets will take a hit this year and jobs (some from Vancouver Island) will be lost and new ones put on hold. This will affect all of Canada.

How long this will last? No one really knows.

— The Honorable A. Brian Peckford P. C. is a former energy consultant (1989-2001), former Energy Minister for Newfoundland (1976-1979) and former premier of Newfoundland (1979-1989). He lives in Qualicum Beach. E-mail: brianpeckford@gmail.com

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

Parksville pedestrian airlifted to hospital in Vancouver after nighttime collision

Police report man’s injuries were ‘significant’ but not life-threatening

Discussion on importance of Orange Shirt Day set for Parksville Museum

Annishnawbeg Nation elder Samuel Stevens to lead talks

Parksville Generals face Nanaimo Buccaneers to open VIJHL season

Fans not permitted inside arenas due to COVID-19 restrictions

No extra help for Qualicum school district’s courtesy bus riders

RDN unable to adjust routes ‘in any meaningful way’

105 new COVID-19 cases, 1 death as health officials urge B.C. to remember safety protocols

There are currently 1268 active cases, with 3,337 people under public health monitoring

U.S. Presidential Debate Takeaways: An acrid tone from the opening minute

Here are key takeaways from the first of three scheduled presidential debates before Election Day on Nov. 3

B.C. nurses report rise in depression, anxiety, exhaustion due to pandemic

A new UBC study looks into how the COVID-19 response has impacted frontline nurses

National child-care plan could help Canada rebound from COVID-induced economic crisis: prof

A $2 billion investment this year could help parents during second wave of pandemic

Search suspended for Indigenous elder last seen mushroom picking in northwest B.C.

Mushroom picker Thomas (Tommy) Dennis has been missing since Sept. 16

Join Black Press Media and Do Some Good

Pay it Forward program supports local businesses in their community giving

16 MLAs retiring from B.C. politics add up to $20M in pensions: Taxpayers Federation

Taxpayers pay $4 for every dollar MLAs contribute to their pensions

‘Bonnie’ and ‘Henry’ among latest litter of service dog puppies

B.C. Alberta Guide Dogs names two pups after provincial health officer

B.C. VOTES 2020: Few solutions offered for ‘out of control’ camping

B.C. Liberals, NDP spend millions as problem keeps growing

Most Read