Oil prices affecting Western Canada exports

by MM&D Online Staff

CALGARY, Alberta–Alberta and Saskatchewan will have lower exports this year due to depressed oil prices but will rebound in 2016 through a partial price recovery and volume gains, according to a new global export forecast released by Export Development Canada (EDC). Manitoba will also see declines in its energy exports in 2015, but gains in other important sectors will offset that and give it a modest increase in overall exports. All three provinces will enjoy export growth in 2016.

According to the Global Export Forecast Fall 2015, Alberta’s overall exports will slump 23 percent in 2015, due to a 30 per cent drop in exports of energy, which accounts for more than three-quarters of the province’s exports. Saskatchewan, which relies on energy for about 40 percent of its exports, will also see a significant decline–43 percent–in that sector, but strong growth in exports of fertilizers and agri-food will greatly moderate the effects on its overall export performance. Manitoba’s energy exports will be down 24 percent this year, but as energy is a much smaller share of exports than in the other two provinces, the effect on its overall exports is much less.

“There’s no question that low oil prices are having a major impact on exports from Western Canada, especially Alberta,” said Peter Hall, Chief Economist at EDC. “But Saskatchewan and Manitoba are showing how provinces with a more diversified range of exports can soften the blow caused by declines in one sector.”

EDC says Saskatchewan’s agri-food exports, which roughly equal the value of its energy exports, are set to rise 10 percent in 2015, while fertilizer exports will increase by 38 percent. In Manitoba, the greatest positive contribution to its exports will come from shipments of pharmaceutical products, along with gains from manufacturers such as New Flyer Industries which is providing coach buses to several US state governments. Alberta’s non-energy exports are also seeing a slight increase–one percent–in 2015 and will post a further four percent gain in 2016.

“Manitoba and Saskatchewan are also more diversified than Alberta in the markets they sell into,” said Hall. “While the United States accounts for more than 90 percent of Alberta’s exports, it’s only about two-thirds of the market for the other two.”

A rebound in energy exports in all three provinces next year will also help them raise their overall exports. Alberta will see a 20 percent increase in energy exports and a 15 per cent increase in energy exports and a 15 percent increase in overall exports; Manitoba’s energy exports will climb 15 percent and overall exports by six percent; and Saskatchewan will enjoy a 13 percent increase in energy exports and a five percent jump in overall exports.