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Is the Sky Falling? Economic Perspective on Edmonton and Oil Prices

Is the Sky Falling? Economic Perspective on Edmonton and Oil Prices

Wow, there sure is a lot of bad news about oil prices and its impact on the Edmonton and Alberta economies.

You’d think the sky is falling with all the doom and gloom.

I used to work as a reporter and photographer in the newspaper industry so I know bad news sells papers.

“If it bleeds, it leads” is the old newsroom saying.

Here’s a bit of perspective for you and your clients as you read stories about plunging oil prices,  job losses and budget cuts.

Let’s compare February 2005 with today.

In February 2005:
    •    Oil prices were $47.96 US per barrel
    •    The Canadian dollar was $.805/US
    •    The Bank of Canada’s overnight rate was 2.5 per cent
    •    The prime rate was 4.25 per cent
    •    A five year fixed rate mortgage was 5.59 per cent
    •    It cost $1,846.92 per month for a $300,000 at 5.59 per cent rate and a 25 year amortization
    •    The population of workers in Fort McMurray camps was about 10,000
We were in an economic BOOM!!!

Now fast forward to February 2015
    •    Oil prices are $52 US per barrel
    •    The Canadian dollar is $.8033/US
    •    The Bank of Canada’s overnight rate is 0.75 per cent
    •    The prime rate is 2.85 per cent
    •    A five year fixed mortgage rate is 2.79 per cent
    •    It costs $1,387.31 per month for a $300,000 mortgage at 2.79 per cent rate and a 25 year amortization
    •    The population of workers in Fort McMurray camps is about 44,000.
The newspapers are saying THE SKY IS FALLING and many people are sitting on the fence about buying a home.
That doesn’t make sense when you look at the economic fundamentals.

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