Calgary Oil Crisis 2015 Is Little Worry To Many Businesses
CALGARY REAL ESTATE NEWS
Since the price of oil decreased, many of us Calgarians are concerned about the big effects this shift will have on the economy and Calgary real estate. Many people and various businesses however, are showing little worry. I read a great article by Claudia Cattaneo on her take of the oil boom decrease and how many are ot too concerned. I want to share some of that information with you on my blog.
Business As Usual In Calgary...For Some
In Calgary, its business as usual during the oil crisis of 2015: there has been no drop in sales for most luxury items such as jet charters and luxury automobiles; and Calgary bars and restaurants are still doing well. All of these factors look promising to us Calgarians. There is a downside though: some believe that the increase in high priced parking is a sign of greater lows to come; or maybe the increase in empty taxis should cause an alarm; or maybe the non-profits and worry over reaching their financial goals.
Increase in empty taxis during this time
We Don’t Need To Be Too Concerned
Nevertheless, Calgary has made great strides since the real estate decline after the 1980 National Energy Program led many to abandon their homes. The city is also doing much better since the global economic decline of 2009 when businesses like the local malls were barely busy.
However, the rapid shift from being a once booming economy to being an economy affected by the oil shock has not become readily apparent to most of the city.
According to Kyle Murray, professor of marketing at the University of Alberta, many Albertans will be aware of the end of the oil boom within the next year despite the current economic success of Alberta.
“It’s much too early,” says Mr. Murray, “Most of us haven’t had a pay cut, we haven’t lost that many jobs and we haven’t seen large-scale freezes or big increases in taxes or cuts in services. In fact, the things that have changed right away are mortgage rates are falling and gas that is cheaper, and so far the impact of the so-called crash is it costs us less to live. But that is not likely to last.”
Video: Oil Prices and the Current Outlook For Recovery
Concerned Yes, Panic No
Even the popular downtown Calgary restaurant Teatro is starting to feel the effects of the oil crisis due to its popularity among key players of the oil economy. According to the operations manager of the Teatro Restaurant Group, the restaurant has concerns about tighter corporate budgets despite their still booming lunch business.
Food at Teatro, popular downtown Calgary restaurant can command over $40 CAD a plate but business is still good during Calgary oil crisis 2015
Calgary Chamber of Commerce president and CEO Adam Legge remarks that the majority of the small companies in the city are making preparations to offset the end of the oil boom even though they “have not experienced much in the way of business impacts yet.”
Adam Legge, Calgary Chamber of Commerce president and CEO
No Big Deal, We’ll Overcome It As Usual
Some credit the indifference towards the end of the oil boom to confidence in reoccurring economic cycles, which means most people see the oil shock as a temporary inconvenience and not a permanent downturn.
“In Alberta we have all seen this before,” Mr. Legge said. “Many businesses are approaching 2015 with caution, avoiding outlaying unnecessary capital, delaying equipment purchases or working to get the most out of current staff levels rather than increasing their workforce. To be clear, we are taking about prudence, not panic.”
Video: Adam Legge, Calgary Chamber of Commerce president and CEO speaks on the state of business in Calgary with Calgary Mayor, Naheed Nenshi
Preparation Just In Case The Worst Comes
The Canadian Association of Petroleum Producers reported a 33% budget decrease from $69 billion in 2014 to $46 billion in 2015 between oil and gas producers. Shareholder profits and number of employees are also potential areas of cutbacks for many companies. The Bank of Canada is predicting a decrease in growth for next year, estimating a small transition from 2.4% to 2.1%.
Brian Reidy, head of the Calgary office to Towers Watson, often consults with most Calgary employers on human resource solutions. He claims that the oil industry is planning on being cautious because of prior experience in dealing with a strict labor market.
“Typically in these cycles companies have had a tendency to indiscriminately slash head counts,” Mr. Reidy said. “But we are not seeing that today, at least not yet.”
“Based on our client discussions, they are taking a much more considerate approach to talent. In fact, some of the forward-looking organizations are using this as an opportunity to find talent in targeted areas where they have experienced a shortfall during the past few years of growth. And so while there is a hiring freeze in general, if you have specific niche areas of talent that you need people, good companies are probably going to go out and look for folks that got laid off.”
Mr. Reidy also commented that employers are cutting expenses by reducing training and conference budgets and by minimally increasing or freezing salaries.
Ensign Energy Services Inc has also established the trend of reducing board director salaries by 20% and executive salaries by 10%.
Thanks to the experiences learned from the last oil shock of 2009 (when employers had to significantly increase personnel to accomplish company goals), “clients are saying: We got hit hard the last time … let’s ride this as long as we can, help our employees understand this isn’t business as usual, but also prepare for when this shifts to the positive and we need to get back to a growth track,” Mr. Reidy said.
My Thoughts On The Subject
As seen in my buy or sell in Calgary oil crisis post, we have endured similar oil crisis’ before and came back stronger with a booming economy and real estate market. I feel the same will happen once again. Though our economic outlook may look a bit shaky, history will repeat itself and we will bounce back, most likely faster than in the past. When that happens, the economy as well as the Calgary real estate market will be better than ever.