Alberta, Canada's economic oasis, hit by recession as oil prices fall

Alberta, once a refreshing economic oasis in a troubled North American economy, is in for some tough times.

Fueled by the energy boom of the late 1970s, this oil-rich province posted a remarkable growth rate of 10.2 percent in 1979. But Alberta's gross domestic product has been in a sharp decline since then.

This year it is projected to drop to about 4 percent. Canada's overall economic growth rate is expected to be a worrisome 0.4 percent.

Real growth of 4 percent is healthy by many standards, but it is now clear the economic recession is taking its toll in Alberta. That is not only disheartening news for the 2 million people who live in this western Canadian province, but it has implications for the nation as well.

As the chairman of the Canadian Manufacturers' Association, Jean-Jacques Gagnon, noted in an address last week: ''Until recently we were comforted at least by the knowledge that the Alberta market was still holding and fairly buoyant, (but) now according to the numbers I see, I'm not so sure.''

For example, 69 percent of Alberta's manufacturers are reporting declines in orders this year. Last year only about 20 percent showed a drop in business.

Mr. Gagnon's apprehension is based on the sudden downturn in Alberta's oil and gas industry.

For the most part, slumping world oil prices are blamed for this (Alberta's price for oil is pegged to the world price), but energy analysts here also point to government regulation of the oil industry as contributing to a situation in which increasing volumes of Canadian oil are being shut in. This further aggravates industry cash flow problems.

Thus, Alberta, which usually supplies 85 percent of Canada's oil, is being hit hard by a number of external factors, including slumping oil prices, high interest rates, inflation, and the National Energy Plan. The NEP is seen as shifting the ''oil play'' from Alberta to the Canadian Arctic and offshore Newfoundland.

In short, Alberta is in for a rocky ride. In an attempt to level some of the bumps, the provincial Progressive Conservative government of Premier Peter Lougheed is coming to the rescue of the ailing oil and gas industry, the kingpin of Alberta's economy.

By taking money out of surplus revenues accumulated from past years of oil and gas production and by foregoing some future oil and gas royalties, the Lougheed government will pump $5.4 billion into the industry over the next five years.