Name: With oil prices seeing record lows, coronavirus puts oil cities in a deeper crisis
Uploaded: 2020-04-04
Duration: 9 min 20 s
Description: Oil dependent cities like Calgary, Houston and Stavanger are struggling as oil prices see record lows but they face a deeper crisis as the coronavirus pandemic halts oil production.

While coronavirus is hitting economies and countries around the world, it's really hitting oil cities on a different level. [ BLANK_AUDIO ] So right now the oil sector is facing two separate issues and both of them are massive in scale. The first one is corona virus. And that means way less cars on the road, flights aren't flying, ships aren't running. And all of that demand is taking millions and millions of barrels of oil out of global demand right now. The second problem is the price war between Saudi Arabia and Russia. Saudi Arabia and Russia have had this sort of uneasy truce for years where in order to keep prices at a higher level that makes the sector more profitable or profitable at all. They have suppressed Production and that Alliance has fallen apart. And so now Saudi Arabia is releasing another million barrels per day of oil on global markets. And keep in mind they're releasing more oil in a world that needs Much, much, much less than it did two months ago. And that's caused the price to sink to 18 year lows and the impact has really been immediate. And for all of these cities, if you look at jobs, if you look at public sector funding, they all sort of Rise and Fall on the oil price. We generally like to see high gas prices in the areas you would imagine the higher the better. Obviously, you know, it's kind of the rule of thumb here, but I had noticed a slow but steady decline in gas prices and so on. That's when the bells start going off is when you start seeing gas or dollar 70 a gallon. So in Houston we spoke to Greg Nino who is a real estate agent in Harris County. And he was having Having a great year until coronavirus, hit. You have basically no showings it's very very far and few between that you're gonna have somebody out looking at 10 or 15 houses over a three hour time period Even if there are buyers willing and able to do that there's a certain percentage of home sellers that are just not gonna let you in. I can go off of last month before this started on my listings, I think I had eight or nine at the time that were active. You know, two of them that were priced between $ 160 and $ 200, 000. We're getting 1520 showings. Over a four or five day time period, we were in a multiple offer situation. When this happened, one of those clients took her home off the market and tried to completely just fell off a cliff right before she made that decision. And as far as everything else, there are no showings whatsoever. You're certainly not having any open houses. We're not even permitted to advertise those on our MLS, nor should we be having them To begin with, but it's a complete stop Economically they are a massive, massive massive economy and in 2018, 30 % of their GDP was based on the oil sector. Directly based on the oil sector, not including all the extra services all the extra manufacturing around the oil sector, all those grocery stores and pharmacies and houses that people know oil sector buy. If you think about that, that is absolutely huge. Unfortunately, a lot of the the lower paid individuals that are associated with oil and gas are going to be impacted more and the fear is they won't be able to, why get under contract to purchase your home or even purchase a home altogether, If I could lose my job in 30 or 45 days? So in Stavanger, you'd seen a massive revival in the last several years. It had been hit hard by the 2014 price crash like a lot of other kinds. countries and economies dependent on oil. But in the last couple years it had really been coming back and in fact late last year, it's an opening of the Johannes fair drop oil field, a field off the Norwegian continental shelf that could extend the country's oil sector for decades. It had seen a lot of exploratory drilling and it was seeing a real ramping up and in Stavanger itself, unemployment was quite low. Real Estate was coming back the city as a whole had really started to kind of finally turn over a new leaf as it were from 2014 and was sort of back on top. Stavanger being the oil capital of Norway. The oil price affects almost everything in the in the city and the city area. 20, 25 % of the employees work in the oil and gas industry in one way or another. And of course every other industry is also depending on on that industry and the people that works in the oil and gas industry. We have seen quite a big change in the unemployment numbers just in these couple of weeks. It has gone up in Stavanger, the last three weeks from about, as I mentioned, two and a half percent. TO about a little bit over 10 % now, I believe and in the oil and gas industry 5 % have been temporary laid off the last three weeks and about 18 % it's a possibility that they can be temporary laid offs. And of course if you look at hotels, airlines, shops and so on. The number of temporary layoffs is enormously high in hotels around I believe between 80 and 90 % is temporary laid off [ BLANK_AUDIO ] Calgary's in kind of a unique economic situation. After the oil price crash of 2014, a lot of other economies saw a gradual recovery as oil prices Came back up, they sort of fed back into the local economy. But Calgary didn't really have that in the same way. Of course oil prices went up. But because of where it's located in the center of Canada with not really options to export by sea, it really only has one customer and that's the United States and the year since 2014. The US has just produced more and more and more oil, going on to produce record amounts. And so that oil doesn't really have a home in the same way it used to. And there hasn't really been a big Recovery on the way for Calgary in those years since >> there's not a lot of other industries in Calgary, so almost everyone you meet will somehow or another be related to the industry whether it's engineering or marketing or geoscience, everyone is somehow tied into that industry. So we're very, very Much in flux with oil prices so as oil prices go up and down, that's how the Canadian economy goes. What wasn't realized in the last price war and still I think is not recognized now is how connected the oil and gas industry is to paying for the public sector. It generates income taxes, corporate taxes, royalties, and so these are really what pay for For teachers, for nurses, for doctors, for the big social programs that we have, and as a result, we've already started to see budget cuts from the last price war and I don't think that people have realized how bad the public cuts are gonna be now. When the oil price crashes, it's very hard To find the money and the investment to transition and diversify the economy, and when the oil price is very high and times are good. Unemployment is way lower than the rest of the country. Real estate prices are super high, the economy is booming. It's very hard to find the motivation. To switch economy away from something so lucrative. 10 years from now, we're still gonna be using oil. 20 years from now, we're still gonna be using a lot of oil. We are in the midst of a transition, but transitions take four to five decades they don't take 10 years. So 10 years from now, there will still be a functioning oil and gas industry in Calgary there will still be one in the United States there. Also we wanted in Saudi Arabia, it might take a long time to get there though The message for a lot of oil cities after every oil price crash is that these places need to diversify. They need to have other sources of income and other industries. But after this is all over We're still gonna be facing another challenge, which is climate change. And this will offer a chance maybe to radically reimagine not only what these cities could look like in a world that's not dependent on oil incomes, but in a world that's not dependent on oil at all. And that's gonna be the real challenge that comes next. [ BLANK_AUDIO ]

Oil dependent cities like Calgary, Houston and Stavanger are struggling as oil prices see record lows but they face a deeper crisis as the coronavirus pandemic halts oil production.

With oil prices seeing record lows, coronavirus puts oil cities in a deeper crisis

Energy

The pandemic is affecting every aspect of the economy there