Energy production down during pandemic
Alberta's oil production in May was down by 14 per cent (492,000 barrels per day) compared to a year earlier
By ATB Economics 5 August 2020 1 min read
As an energy exporter, Alberta’s economy has been hit by both the decline in energy use and the general economic malaise associated with the pandemic.
From manufacturing and transporting products to operating stores and offices to international travel and busing kids to school, economic activity uses a lot of energy. As a result, when large portions of the global economy were shut down in response to COVID-19, the overall demand for energy declined.
The drop in Alberta’s oil production in April and May provides an example of how this has affected Alberta. Reduced demand combined with ample global supply pushed oil prices down to the point where some producers literally could not give it away. As a result, Alberta’s production was down by 18 per cent in May compared to March—that’s over 690,000 barrels per day.
The picture is roughly the same on a year-over-year basis, with production in May down by 14 per cent (492,000 barrels per day) compared to a year earlier.
The “bright side” is that our reduced output combined with that of other oil-producing jurisdictions has shored up the price.
In part because of its access to global markets, Newfoundland and Labrador is the only oil-producing province that has not seen its production fall significantly since March. The decline in Newfoundland and Labrador was just 0.4 per cent between March and May with production actually up by 11 per cent compared to the year before.
The reopening of the global economy has been accompanied by a rise in energy use. This bodes well for Alberta’s energy producers, but the path out of the pit dug by the slowdown is likely to be long and bumpy.