Canada is the fifth largest oil producer in the world. Alberta alone is in eighth spot ahead of oil-producing powerhouses such as the United Arab Emirates, Kuwait, Mexico, Venezuela and Norway. 

In 2019, Alberta produced over 3.5 million barrels of oil per day. That works out to about 220 Olympic-sized swimming pools of crude each day.

With one exception, Alberta’s oil production has increased every year for over a decade. The exception was 2016 when forest fires in northern Alberta caused annual production to fall by 0.6 per cent.

The provincially-mandated production cuts imposed in January 2019 to shore up the price of Alberta oil only slowed the increase in Alberta’s annual oil production.

Oil prices are obviously a key variable, but the volume of production is responsible for a lot of jobs. And from the damage it can cause to reservoirs to contractual obligations to the need to maintain at least some cash flow, shutting in production is not an easy decision to make.

So you know it’s a big deal—and a bad situation—when Alberta producers have started to cut oil production. 

As with most things when it comes to the pandemic, we are guessing here, but oil production shut-ins could reach 1.1 million barrels per day this summer. Assuming things improve by the fall, annual production could end the year 14 per cent (176 million barrels) below last year’s baseline. 

A production decrease of this magnitude will be devastating for the energy sector and the broader economy.

-----

A note on COVID-19: The COVID-19 pandemic is having a major impact on the economy here in Alberta and around the world. The Owl will report on these impacts when good information is available while continuing to track regularly scheduled releases of economic data and long-term trends. Please go to atb.com for COVID-19-related updates from ATB Financial.