Calgary Boom: Is it all downhill from here?

[OracleOfCalgary]

Whatever happened to Calgary that former city of well run businesses, a strong work ethic, good service, great community spirit, personal modesty and thriftiness and good government. Among those I've talked to, seems I'm the only one who sees this boom ending and this city being in a major world of pain 5 years down the road. People say this boom is based on oil, but I say it's 80% real estate (flipping and construction) and easy credit... pull either of those two cards out and the whole thing will fall down.

[FurnaceFace]

The boom will end at some point. It won't go on forever. When it does, and how it will affect people is unknown. I can see a slow decline but I'm not thinking we'll see a big bust in a short time period.

The boom is based on all those factors however I'd submit the root of the good economy is still primarily based on oil and the real estate boom is a result of it. Without a hot economy real estate and construction wouldn't have the snowball effect on the economy we're witnessing.

[redforever]

Originally Posted by OracleOfCalgary

Whatever happened to Calgary that former city of well run businesses, a strong work ethic, good service, great community spirit, personal modesty and thriftiness and good government. Among those I've talked to, seems I'm the only one who sees this boom ending and this city being in a major world of pain 5 years down the road. People say this boom is based on oil, but I say it's 80% real estate (flipping and construction) and easy credit... pull either of those two cards out and the whole thing will fall down.

Real estate here is based on the oil industry.

But you are right about one thing, if the oil boom dries up, and people lose jobs, there will be a lot of real estate on the market and then all those who got easy credit will be feeling the pain.

[photon]

Originally Posted by OracleOfCalgary

Among those I've talked to, seems I'm the only one who sees this boom ending and this city being in a major world of pain 5 years down the road. People say this boom is based on oil, but I say it's 80% real estate (flipping and construction) and easy credit... pull either of those two cards out and the whole thing will fall down.

So what would cause either of those two cards to be pulled. What economnic or political factors do you see causing the oil industry to turn down? What economic or political factors to you see causing housing to turn down?

[Eddie Bronze]

How many oil companies are based out of Calgary right now?

I have a friend who works for one and he gave a figure but I'd like to know the response on here first before I post it. The number seemed a bit staggering to me, and really telling of how the economy is being driven in this city right now.

[Dion]

How the Alberta government handles the inflation that comes with an over heated economy will be the thing to watch. The rising cost of fuel has a huge impact on the economy. Think of the transportation costs of getting the goods to the marketplace. It's always passed on to the consumer in the form of higher prices. Then there the lack of workers that forces enployers to raise wages. Again that cost is passed on to consumers.

With the supply of oil getting scarcer and harder to get out of the ground, the price is not going to drop anytime soon. Oil prices we saw during the last bust isn't going to happen again.

[Maritime Q-Scout]

you want to know what happens when the boom is over?

A Look Into Your Future

[Eddie Bronze]

Someone quickly give Jon negative rep and ban him now!!!

[Dion]

The 70-page report, titled Taming the Tempest: An Alternate Development Strategy for Alberta, found that more than half of Albertans don't feel they've benefited from the current boom and just as many feel susceptible to the looming bust.

Gibson pointed to the disadvantages already being felt, including growing homelessness, skyrocketing inflation and longer lineups at hospitals and medical clinics, along with "an overheated economy that is entirely vulnerable to the whims of international energy markets."

http://www.edmontonsun.com/News/Albe...68374-sun.html

[FlamesAddiction]

When it ends, that doesn't mean it will be followed by a decline. You can still expect normal growth.

Vancouver began it's boom in the early and mid-80s, and although it has ended now, I wouldn't say that it's been all downhill since then.

[Clever_Iggy]

No doomsday - just not sustaining the growth that we've experienced in the past 5-7 years.

Alberta is diversifying it's economy slowly - granted, with oil being so major and so easy, it dominates, but as the oil industry stabilizes or declines, the diversification into secondary and tertiary industries will start taking more precedence.

[RogerWilco]

Originally Posted by OracleOfCalgary

Whatever happened to Calgary that former city of well run businesses, a strong work ethic, good service, great community spirit, personal modesty and thriftiness and good government. Among those I've talked to, seems I'm the only one who sees this boom ending and this city being in a major world of pain 5 years down the road. People say this boom is based on oil, but I say it's 80% real estate (flipping and construction) and easy credit... pull either of those two cards out and the whole thing will fall down.

Oil is the only reason that construction is taking place. Construction is always a secodary result of some other industry giving people more money than they know what to do with, and the influx of people coming to get their share of that money. If the oil industry dies, no construction.

[FurnaceFace]

Originally Posted by Eddie Bronze

How many oil companies are based out of Calgary right now?

Depends what you define as Oil companies. If you include Oil, Gas, supply, servicing companies and associated companies you have a heap. If you broaden it to include companies that depend on O&G you might as well just grab the bulk of the yellow pages.

Stats Can numbers from 2005 are:

Energy Sector


Fast Facts, 2005
Employment 41,800
Total 10-year Employment Change 30.6%
Number of Companies 1,859

Source: Statistics Canada, Labour Force Survey and Canadian Business Patterns

This whole pdf is interesting:
http://www.calgaryeconomicdevelopmen...ile_Energy.pdf

[PsYcNeT]

Originally Posted by OracleOfCalgary

Whatever happened to Calgary that former city of well run businesses, a strong work ethic, good service, great community spirit, personal modesty and thriftiness and good government. Among those I've talked to, seems I'm the only one who sees this boom ending and this city being in a major world of pain 5 years down the road. People say this boom is based on oil, but I say it's 80% real estate (flipping and construction) and easy credit... pull either of those two cards out and the whole thing will fall down.

Huh?

[teamchachi]

Originally Posted by photon

So what would cause either of those two cards to be pulled. What economnic or political factors do you see causing the oil industry to turn down? What economic or political factors to you see causing housing to turn down?

How about the rest of the country getting jealous of our ridiculous oil revenues and supporting Ottawa in hitting Alberta with NEP V2? That would do it.

Or they could just effectively shut down the oil sands by slapping all sorts of anti-CO2 emissions regulation on it. Then deny the province the option of using nuclear, even though Ontario is crawling with reactors...

There's lots of stuff that could go wrong, and it could happen pretty fast. Most of you are too young to remember the 18% interest rates in 1981, and the tsunami of foreclosures and bankruptcies. It could easily happen again. Just imagine a 1929 style stock market crash, in combination with a US dollar falling like a rock. Put all of Calgary's stock options under water, then jack the interest rates and PRESTO!!!

Good times. Not saying its going to happen. But it could...

[Clever_Iggy]

Originally Posted by PsYcNeT

Huh?

Oracle's reference to "good government" must be in reference to "Do Nothing Duerr". His lack of leadership and exceptional skill at staying under the radar and sitting on the fence put Calgary years behind in infrastructure development.

[Reggie Dunlop]

What will happen to the Flames, oh Wise Oracle?

[iggypop]

Ya I have a feeling that in a few years a lot of houses are going to be owned by the banks once the boom ends, just like they owned a bunch in the early 90s.

[crunch]

It should be noted that the Russians hold most of the cards on oil prices. If you haven't noticed, the US is starting to take a tougher stance on Russia.
When Russia decides that they won't be bullied, look out. They could easily wash out the supply vs demand on oil and collapse the market.

As for what's happening in Alberta, homebuilders are making a killing. If the govt were actually good, they'd be looking out for the people, which they are not. It's become a free-for-all cash grab province, come one, come all. With absolutely no concern for the future. These booms don't last forever, and this one looks like all of the others. In the end, everyone stands around wondering "so..but...if...when...". At this point, a total disregard for managing a booming economy will be highlighted. Inflation is exorbitant in Alberta, when that becomes apparent, there are a whole lot of homeowners that will be down and out. I wish 1st time homebuyers would become more wary of that. The market seriously needs to come down.
Right now, everyone's smiling....and kidding themselves.

[Flames in 07]

Originally Posted by crunch

It should be noted that the Russians hold most of the cards on oil prices. If you haven't noticed, the US is starting to take a tougher stance on Russia.
When Russia decides that they won't be bullied, look out. They could easily wash out the supply vs demand on oil and collapse the market.

As for what's happening in Alberta, homebuilders are making a killing. If the govt were actually good, they'd be looking out for the people, which they are not. It's become a free-for-all cash grab province, come one, come all. With absolutely no concern for the future. These booms don't last forever, and this one looks like all of the others. In the end, everyone stands around wondering "so..but...if...when...". At this point, a total disregard for managing a booming economy will be highlighted. Inflation is exorbitant in Alberta, when that becomes apparent, there are a whole lot of homeowners that will be down and out. I wish 1st time homebuyers would become more wary of that. The market seriously needs to come down.
Right now, everyone's smiling....and kidding themselves.

Most homebuilders aren't making a killing, in fact many projects have been well below targets, they have to buy expensive land as well.

I don't get why everyone equates strong economy with imbending doom. in the 80's the oil industry had it's run because of a artificial restriction of supply. Now, it is real supply restraints, but more importantly a huge demand is straining that supply. Alberta has the largest or second largest oil reserve on the planet. In some respects this IS the center of the economic universe. Land isn't overvalued, it was undervalued for a decade until now.