Crude crisis hits growth forecast in Canada's top oil province

CALGARY (Bloomberg) -- Alberta slashed its economic growth forecast for this year and next as plunging prices for local crude threaten to eat into corporate profits and reduce investments.

Gross domestic product will increase 2% in 2019, the province said Friday in its second-quarter fiscal update. That’s down from an original projection of 2.5% In the March budget. The growth forecast for this year was cut to 2.5% from 2.7%.

The dimmer outlook reflects the fallout from a crisis in Alberta’s oil patch, sparked by a lack of pipeline space that has sent Canadian heavy-crude prices to record lows and prompted companies to shut in production. The situation, costing the nation’s economy $60 million/day (C$80 million/day), has spurred the province to seek to buy rail cars to help move more crude to market and appeal to the federal government for help.

“This is a crisis,” Alberta Finance Minister Joe Ceci said in a statement from Edmonton. “Albertans and working Canadians cannot afford to leave C$80 million on the table every day. It doesn’t make sense and, if the differential is not addressed, our entire country could be plunged into a downturn.”

Western Canada Select closed at $13.46/bbl earlier this month, the lowest on record in Bloomberg data stretching back to 2008. The discount to U.S. benchmark crude reached $50 a barrel last month, also a record. The gap has since narrowed to $30.