The hottest housing market in North America, driven by oil
By Marshall Loeb, MarketWatch
Last update: 7:38 p.m. EDT April 21, 2008
NEW YORK (MarketWatch) -- A boom of unprecedented dimensions is sweeping Canada's spectacularly scenic western province of Alberta, the Texas-sized territory with a population of 3 million that is home to a pair of world-class cities -- Calgary (population 1.2 million) and Edmonton (population 1.1 million).
Most important today, though, is that Alberta is the source of the world's largest trove of tar sands, the sticky substance locked in rock that North American Indians have used for centuries to caulk their canoes but that also can be mined and processed into oil.
Refining it makes sense if and when ordinary oil climbs above a certain price. Oil marketers and geologists can argue what that magic figure is -- Canada's Energy Information Administration estimates that alternative fuel sources, including oil sands, become economically viable when the price of oil hits $30 to $60 a barrel.
At the recent world price of $114 a barrel, the figure has long since been exceeded, particularly since recent improvements in mining and extraction techniques have significantly reduced tar-sands production costs. See related story.
Canada has rather rapidly become the largest supplier of oil to the U.S. Alberta is producing more than 1 million barrels of so-called synthetic oil a day, and the province is sitting atop the largest petroleum deposit outside the Arabian Peninsula (as much as 300 billion recoverable barrels).
As a result, the economy of Alberta since 2002 has been growing an average 12.2% annually. That's not far from China's average, 14.8 %. In the past decade, Alberta's per-capita GDP has almost doubled, to $66,000.
Demand for labor is so intense that Alberta has basically run out of people. Fast-food emporiums, for example, are closing down because managers cannot find folks willing to work for their modest wages.
Says Ron Gilbertson, CEO of the Edmonton Economic Development Association: "We no longer talk about unemployment. We talk about effective full employment." He expects employment will grow 2.5% to 5% annually over the next three to five years, as workers rush in from other parts of North America.
Homes double in value
With jobs aplenty and spending power so intense, real estate prices have doubled in the past three years. They are comparable to those in the recent bubble times in the U.S. and thus could present problems in the future.
And there are other dangers in this otherwise optimistic scene. Canada's overall inflation rate is running a stiff 6%. Back in the oil patch, the mining process creates greenhouse gases and pollutes many streams.
"The environmental cost has been great," says Jim Boucher, chief of the Fort MacKay First Nations Council, which includes Cree and Dene Indians living near the tar sands. Surely the oil companies will have to spend more to clean up their act, notably with the sands.
Meanwhile, concludes a study by the national statistical agency, Statistics Canada: "The investment boom shows no sign of ending soon."
Reporter Gergana Koleva contributed to this story.
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