A prominent economist who once predicted the price of oil would exceed $200 a barrel says the current low price is a chance for Alberta to take a fresh look at how it gets its revenue.

In 2008, Jeff Rubin, then chief economist at CIBC World Markets, predicted the price of oil would hit $225 a barrel by 2012.

But since then there has been a flood of new supply from Texas and the Dakotas that has been flattening prices, Rubin said.

Alberta Premier Jim Prentice says the plummeting price of oil means the province is facing a $500-million deficit this year instead of a budget surplus.

The sooner Alberta decreases its economic dependence on the oilsands, the better off the province will be, Rubin said.

“Maybe it’s a time instead of relying on bitumen royalties to start taxing carbon for a change,” he said.

“I mean, you know, B.C. has a lower personal income tax rate than Alberta. Now true, you pay a lot more at the pump, but the whole idea of a carbon tax is to discourage you from using as much at the pump.”

Alberta already has one emissions-reduction levy — the Specified Gas Emitters Regulation (SGER) — which was introduced in 2007.

It requires facilities that emit more than 100,000 tonnes of greenhouse gases per year to cap their emissions intensity at 12 per cent below the average for 2003-05, or pay a penalty for exceeding their targets of $15 for every tonne over the limit.

Growth forecast gloomy

Bank of Montreal chief economist Douglas Porter predicts Alberta's growth rate will be chopped in half in 2015 because of low oil prices, knocking the province off the podium as Canada's fastest growing economy.

“Alberta has by far and away led the country in growth rates in the last 10 years,” he said.

“But we see its growth rate going from about 3½ to maybe 1½ per cent in the year ahead, depending on where oil prices settle out.”

If oil prices stay low, he can see Alberta's growth basically disappearing, he said, which could create a large fiscal shortfall for the province in 2016.

B.C. and Ontario will benefit because of the lower costs for the manufacturing sectors, Porter said.

Just a blip?

However, ATB Financial chief economist Todd Hirsch predicted in his 2015 Alberta economic outlook released on Wednesday that the price of oil will bounce back to about $75 a barrel by the end of the year.

He said a recession is unlikely and this downturn is probably just a blip.

“Nonetheless, we are going to be in for a few months here, maybe the first half of the year, where it is going to feel a little bit rocky. I do think we are in for some layoffs in the province, already we've been seeing signs of that.”

Hirsch said smaller oil and gas producers will bear the brunt of the low prices. If the price of oil is still below $50 in six months, there would be more reason for concern, he said.

In the meantime, Hirsch said, low prices will help other industries, including forestry, tourism and agriculture.

He added he does not expect any major changes in house prices, which differs from the predictions of other analysts.

Layoffs coming?

Many companies in the Alberta oilsands are bracing for the worst.

Plainsman Manufacturing in Edmonton built a robot to make parts for oil wells seven years ago when workers were hard to come by. The company says it hasn't laid off any workers yet, but has scaled back operations. (Trisha Estabrooks/CBC)

Seven years ago when oil was booming and workers were hard to come by, Plainsman Manufacturing in Edmonton built a robot to make parts for oil wells.

But now the company is scaling back.

"It's not an exciting time for anybody," said Mike Kittlitz, the company's business development manager.

Plainsman Manufacturing has not laid off anyone yet, but it has reduced purchases from some distributors by as much as 30 per cent.

Prime Minister Stephen Harper said Alberta's oil industry will come through the latest dip in oil prices.

“As rapid and negative change as this is for the industry, the industry in my lifetime has lived through changes this extreme and more on many occasions,” Harper said.