Happy Happy Joy Joy

An article from the Edmonton Journal takes a look at the brighter side. Local sunny break amid economic clouds.

So just where is E-town's economy going? Toward a period of slower growth, admits Tsounis, at an estimated 2.5 per cent this year, 2.8 per cent next year, and an average of 3.3 per cent between 2009 and 2011.

That's down from a red-hot five per cent annually between 2003 and 2007. But it's growth nonetheless, at a time when the U.S. economy will shrink, and Canada will struggle to stay above water.

I am not sure when this forecast was made. Was it before the market crash or after? I could only find a forecast from May 2007 on the city of Edmonton website here. There was a lot of optimistic economic forecasts including GDP.

2008 - 5.0%
2009 - 4.0%
2010 - 4.0%
2011 - 4.5%
2012 - 4.5%

The rest of the article was bright and sunny.

Feeling more cheerful yet? Good. There's more.

Let's start with oil prices. They fell to the $67-US-a-barrel range Wednesday, about $80 or 54 per cent below the July peak of $147. The worry warts will tell you we're heading for an '80s-style crash, but that's absurd.

Just as oil markets overshot on the upside, they're now overshooting on the downside. China and India haven't gone away. Once OPEC's proposed cuts take hold, the credit crunch eases -- as it's already showing signs of doing -- and recovery begins, demand will pick up. So will oil prices.

What did the author write just over 2 months ago? In the Aug 12th article Our housing market's correction is not a calamity:

Unless energy prices fall off a cliff, Alberta's economy should remain strong. And that should lead to a stronger housing market in 2009.

So what's a cliff? In my view, oil prices would have to skid to $75 US per barrel or lower for a sustained period -- rendering some oilsands projects uneconomic -- and natural gas prices would have to sink below $7 per million British thermal units (MMBtu), making drilling too costly to justify.

Despite the recent hiccup in commodity prices, I don't think that's in the cards. Now that the speculators are on the run, I'd expect oil prices to find a bottom in the $100-per-barrel range; natural gas should find support in the $8 range.

See previous post

If you don't read the newspaper you are uninformed. If you do read the newspaper you are misinformed.
— Mark Twain