North of U.S. border, mixed blessings from oil's skid

The Athabasca Oil Sands near Fort McMurray, Alberta. Fewer new-car sales are expected in Canada's oil-producing provinces of Alberta, Saskatchewan and Newfoundland and Labrador. Photo credit: BLOOMBERG

TORONTO -- In the U.S., the drop in oil prices is seen as a boost for most of the economy, with some localized pain in the oil patch.

Here in Canada, the view is reversed.

The media drumbeat has been that resource-rich Canada is going to take a major hit from lower oil and gas receipts. The Toronto Stock Exchange index collapsed in September, when oil prices did, and again in December, although it since has made up much of those losses.

The latest example: On Feb. 10, the city of Edmonton withdrew its bid, due March 2, to host the 2022 Commonwealth Games after the province of Alberta said the collapse in oil revenues meant it couldn’t offer the needed financial support.

Impact on dealers

So what does this mean for the auto industry? Will slumping sales in Canada’s oil patch prompt Ford Motor Co. to trim F-series pickup allocations to Canadian dealers, and send more of them to U.S. dealers?

Not necessarily.

In 2014, Canadian dealers sold a record number of new light vehicles: It was the second record year in a row.

Most forecasters see another record coming this year, with sales up slightly. But some are predicting a slight softening in sales.

The drop in crude oil prices “is likely to take a relatively moderate bite out of Canadian economic growth prospects over the next few years,” Crain Alexander, chief economist at Toronto’s TD Bank, wrote in a recent report.

He predicts the weaker Canadian dollar and the strengthening U.S. economy will combine to promote non-oil exports from Canada to the U.S., while lower energy costs will give a boost to Canadian consumers’ spending.

Provincial pain

Still, there’ll be fewer sales in Canada’s oil-producing provinces of Alberta, Saskatchewan and Newfoundland and Labrador, Alexander wrote.

For example, Alberta -- which has led all provinces in economic growth in recent years -- is expected to record real GDP gains of 2.3 percent on average in 2015-16, Alexander predicted, well below the 4 percent it has posted regularly of late.

Instead, Ontario is expected to vault into first place among Canadian provinces in terms of economic growth with real GDP growth of 2.5 percent a year, followed closely by British Columbia.

Added Alexander: “It’s been 15 years since we’ve seen Ontario lead the provincial pack.”

You can reach James B. Treece at jtreece@crain.com

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