LoneSnark
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With oil prices high again, Alberta is hopping once more but with a twist. The skyline of Calgary, the business center of the province, is about to be altered by a huge real estate project; big new jet runways to handle the influx are already in place. While poker is still popular, conspicuous consumption these days includes such things as white truffles and Mercedes-Benz convertibles.
The change is reflected in the very nature of the oil business here: Once built around conventional drilling where independents played a major role, oil is now extracted through a heavy industrial process requiring huge capital investment.
As more oil flows, more economic power and population are shifting westward from the traditional manufacturing centers of Ontario and Quebec, which are trailing in comparison. The rising West is splitting the national economy, forcing the industrial monoliths back east to retool and reorient manufacturing to supply the growing oil economy.
"It's a seesaw effect," said Todd Hirsch, chief economist for the Canada West Foundation, a research group based in Calgary. "What's driving Alberta, Western Canada, and resources up are what's driving Ontario and Quebec down the emerging Asian strength and the strength of the Canadian dollar."
The energy companies say their investments are only just the beginning in oil sand fields that hold estimated reserves equivalent to as much as 175 billion barrels of oil, or more potential energy content than the oil fields of Iran and Libya combined. Oil sands production has risen to just over 1 million barrels a day today from 400,000 barrels in 1995, and it is projected to rise to 2.7 million barrels in 2015.
Here in Fort McMurray, the town closest to the oil sands, truck and bulldozer drivers come from as far away as Newfoundland and Labrador to earn six-figure salaries. They are buying up expensive pickup trucks as if they were toys.
As the town's population has increased to 61,000, from 33,000 in 1996, housing has become in such short supply that the average mobile home now sells for $277,000 and people are renting couches for $500 a month. The crowding and labor shortages pushed Canadian Natural Resources to build a jet runway long enough to accommodate Boeing 737s to allow workers to commute to their giant new Horizon project.
The same forecast might be said for much of Canada. Unemployment is at a 30-year low, the Toronto stock market reached an all-time high this month, and real estate is booming virtually everywhere. Meanwhile, oilmen here are now calling the Canadian dollar, which has climbed more than 35 percent since early 2002, a new petrocurrency.
But Canada is also grappling with some losers amid the boom. Eastern manufacturers have been forced to retool, consolidate, and shed 180,000 jobs in the last two years as cheaper products enabled China to replace Canada as the top exporter of nonenergy products to the American market. Capital investment among manufacturers has decreased since 2000.
Particularly hurt have been companies manufacturing household appliances, electrical equipment, plastic and rubber products, textiles, and pulp and paper mills. At Edson Packaging Machinery, based in Hamilton, Ontario, one-third of the 85 workers were laid off in 2003. By switching to American suppliers, changing its product mix and putting more emphasis on service, Edson has rebounded somewhat and increased its payroll again.
"It's a tale of two economies," said Edson's president, Robert Hattin. "The resource-based economy is hot, and manufacturing right now is facing challenges we haven't seen before." Alberta has 10 percent of the population but directly produces 15 percent of Canada's gross domestic product. Both numbers are likely to rise in the coming years, economists say.
http://www.rigzone.com/news/article.asp?a_id=30779
I thought it was a neat article, and put a few things in perspective.  3/30/2006 10:03:13 AM
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