Alberta’s hard-hit economy could take another beating as uncontrollable wildfires surrounding the Alberta oilsands put the province’s biggest industry on pause.
Analysts says that about 1.1 million barrels of oil have been eliminated from daily production as major oil companies halt or reduce production at six or more surface mines in the heart of Canada’s oil-producing region.
Such a loss would cut Alberta’s daily oil production nearly in half; the oil sector churned out an estimated 2.5 million barrels per day in January and February, according to The National Energy Board of Canada.
The stock market has already responded to the crisis as oil prices move higher, according to Todd Mattina, chief economist at Mackenzie Investments.
But experts say it’s impossible to estimate the total financial toll as flames continue to tear through the region. On Friday the blaze covered 1,010 square kilometres -- nearly 10 times the size of the City of Vancouver -- and one official says it could double in size by Saturday.
The Bank of Montreal lowered the country's growth projections for the second quarter from 1.5 per cent to zero on Friday partially in response to the fires.
"There's just so much uncertainty around this, how much production shut down, what the extent of the damage is, what other sectors that may also be impacted -- we're not sure about that yet,” BMO senior economist Benjamin Reitzes told CTV News.
The bad news comes at a time when Alberta is already struggling through a historic job slump, with 20,800 Albertans losing jobs in April in response to the tumbling price of crude.
For oil workers, the impact is already being felt.
“I was told by my superintendent and foremen just to stay away as long as I can because Suncor is shut down right now,” said Alex Kenzi, an oil worker who evacuated from the region.
The financial shockwaves will also be felt for insurers, who face an estimated $9 billion payout for homes and businesses destroyed in the fire.
Some experts fear that the wildfires could have global repercussions. Canada’s oilsands are believed to be the third-largest reserve of crude oil in the world and make up for a sizeable amount of global production.
On the positive side, some analysts say that rebuilding Fort McMurray could spur economic activity in the area.
"Eventually the rebuilding effort will kick in and this will drive up economic activity," said Pedro Antunes, executive director and deputy chief economist for The Conference Board of Canada.
Rebuilding efforts would likely be supported by taxpayer dollars from the provincial and federal governments. Under Canada’s disaster assistance program, the government is on the hook for up to 90 per cent of reconstruction costs – a number that could easily run into the billions.
Despite concerns about the economic aftershock of the wildfire, Finance Minister Bill Morneau said the federal government’s main focus is helping displaced Albertans.
"I will tell you we have not had one meeting on how we can help financially, because we are thinking about the people first and we'll worry about the money later," Morneau said.
With a report from CTV’s Glen McGregor and files from the Canadian Press
