While headlines across Canada blare the financial threat of falling oil prices to the economy, your average New Brunswicker is finding huge savings. St. Thomas University economics professor Kevin Gibson casts a raincloud over the parade to the pumps.
“While it will help the bottom line of most companies in New Brunswick,” he said, “I don’t foresee lower gas prices being a boon to economic development.”
On Wednesday, global benchmark Brent crude oil fell below $50 per barrel on the world market for the first time since May 2009. New Brunswick gas prices have fallen almost 50 cents since April, to an average 92 cents.
Gibson suspects oil prices can’t fall much further. The cost of crude is being dragged down by Saudi Arabia and the rest of OPEC – Organization of the Petroleum Exporting Countries – choosing not to prop up the price of oil by cutting supply.
The issue with more and cheaper oil on the global market is that many drilling operations, including those in North America, can’t be profitable at the current price. Royal Dutch Shell PLC, better known as Shell, revealed Friday it plans to cut up to 300 employees at its Alberta tar sands operations.
“Many analysts suggest that forty dollars is the bottom of the market because producers will not be able to cover their variable costs at that price,” Gibson said.
“I expect (an) ascent to happen just as quickly as the price has fallen. I just don’t know when it will happen.”
St. Thomas University student Mitchell Syvret-Caplin is similarly pessimistic that the good times will last, but is happy to have had extra money to spend on his parents and grandparents over the holidays.
“I’m not necessarily driving anymore than I usually would, but my wallet is a bit heavier. Basically, when gas prices were higher, like $1.40 or $1.30 [per liter], it would take sixty dollars to seventy dollars to fill my tank on my Honda Civic. Now I can fill up my tank for thirty-five dollars.”
Syvret-Caplin said he spent twice as much as he would have normally spent on his holiday back home in, not necessarily on big-ticket items, but in buying more gifts for more people – including himself.
“It might have been because I spent less during the school year that I felt like I had more money. I did buy a few things for myself. I really felt like I could treat myself this year.”
Gibson says the declining prices have and will help consumers on a number of fronts like consumer goods that now have reduced transportation costs, especially groceries.
He said the economy as a whole in New Brunswick may see some relief if the price stays low until summer tourism season, but that could be negated by homegrown workers returning from the Western provinces if the slowdown becomes more serious.
