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Oil producers recovering, but service providers lagging

Oil producers recovering, but service providers lagging

Posted on: 8/1/2018 | Author: ATB Financial's Economics + Research Team

​​The size of Canada’s economy surged in May, growing by 0.5 per cent month-over-month. That was the strongest growth spurt so far this year. The energy sector was a primary contributor to this growth — and in fact, oil and gas extraction has been adding to the national economy for most of the year. However, not everyone connected to the energy sector is enjoying a revival.

The graph below shows the value of the gross domestic product (GDP) for both oil and gas producers, as well as the companies that provide support services to the energy sector.

Oil and gas extraction topped a record $125 billion (seasonally adjusted at annualized rates). That was helped out by a surge in bitumen production in Alberta following maintenance and capacity-expansion-related shutdowns at some facilities in April. Conventional oil and gas extraction was unchanged as growth in crude oil extraction was offset by a decline in natural gas extraction.

Since bottoming out two years ago in May 2016 (due to the forest fires in Fort McMurray), the GDP of Canadian oil and gas extraction is up 32 per cent.

However, support and service providers to the energy sector have not seen a comparable rebound. The GDP of energy service providers is actually lower by 22 per cent than it was five years ago. That has left thousands of service companies — many of them located here in Alberta — with a continued struggle on their hands.

Gross Domestic Product, graph​​​​​

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