Oil Prices and Edmonton Housing

This post basically is about how events are inter related and how one event can trigger an event somewhere far off. Though I wanted to do a more detailed co-relation between housing prices in Edmonton and world oil prices but “perfect is the enemy of the good.” So I thought might as well share this post and then write up more in a follow up post. The graphs below show the oil crisis of 1979 and of 2008 which resulted in the spike that can be seen in the price of houses in Edmonton. It also goes on to reflect how vulnerable Edmonton as a city is based on purely oil (for some reason it reminds me of Klondike).
[Click the images below to see the data clearly]

Trend 1

Trend 2

Macrotrends.org_Crude_Oil_Price_History_Chart

So as prices of oil go higher globally my understanding is that the relatively expensive extraction from oil (tar) sands become economically feasible and hence driving economic activity in Alberta which is further enhanced by people moving to Edmonton. Other than the prices driven up by those migrating, it also in turns produces a positive vibe about the economy and hence people start buying houses which eventually drives the prices up (and further aggravated by the existing shortage of houses in Edmonton)

Though data provided is from Edmonton & Calgary but we can safely assume  that it applies to the whole of Alberta as well.

calgary housing bubble average price

In my stay in Edmonton I did see that the City has tried to make a shift into other domains (specially technology) but it still remains a mainly oil driven city. Hence for this reason even though 85% of the jobs generated in Canada in 2013 were in Alberta [Ref 1] [Ref 2] – it still remains an unstable destination but then so did the Wild West when a lot of folks moved from the East in order to explore better opportunities in the West.

References:
Why Perfect Is The Enemy Of Good
1979 Energy Crisis (Wikipedia)
T
he 2008 Oil Price Shock: Markets or Mayhem?
Housing Bubbles In Canada by City
Oil sands crude not as expensive to produce as it used to be
Oil Sands: The Costs of Alberta’s “Black Gold”

One thought on “Oil Prices and Edmonton Housing”

  1. Good article, Saad. What you state is true to an extent. But being a realist, one has to believe that what “goes up must come down and what comes down must go up”. What matters is analysis, risk mitigation and timing and if that was not the case, stock markets would have no investment and everybody would have been beating a path down to the safe GICs. Whether Edmonton, Alberta and the West requires being diversified in terms of economic growth options is another question and my answer to that is an unequivocal, Yes. Keep writing, my friend.

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