Entering 2022 with strong momentum. Alberta oil production is back above pre-COVID-19 levels, and drilling activity rose by almost 60% in 2021 (chart 1). As of Q3-2021, Canadian oil and gas investment had risen by 5% y/y ytd, though it still sat about 20% below its pre-pandemic, Q4-2019 level.
Housing market results were mixed in 2021. Alberta MLS unit sales rose by more than 50%—more than in any other province—and starts gained solidly, but residential building construction investment was down by more than 7% y/y ytd as of November—a decline that trailed only that of Newfoundland and Labrador over the first 11 months of the year.
Only gradual oil and gas investment gains over the next few years. Factors expected to limit capital outlays relative to past periods of rising crude values include: producer caution following several years of volatile prices, greater competition from the US shale patch, and investor response to climate change.
Non-oil and gas investment outlook more auspicious. Spending related to commercial building has risen steadily since the winter—though it remains below pre-pandemic levels—and petrochemicals manufacturing and renewable energy should contribute to capital outlays going forward. Amazon Web Services plans to allot $4.3 bn by 2037 to a cloud computing hub in Calgary.
Massively improved financial position incrementally beneficial for near-term growth. After a nearly $26 bn reduction in FY22–24 budget deficit projections, the province increased FY23 capital spending plans by $850 mn; still, that leaves infrastructure outlays on track to drop by 12%. Program spending reductions are also built into each of the next two years.
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