EDMONTON — Oil is known for floating atop the surface instead of sinking into the depths.

But in the wake of crude oil prices going below $0 this week, that doesn’t seem to be the case when a pandemic keeps planes, cars and people immobile across the globe.

Alberta has been gripping the safety bar as its oil and gas roller-coaster has been in free fall since the beginning of the COVID-19 outbreak and the oil price war between Saudi Arabia and Russia that’s flooded the market.

This week, the entire structure shook when the benchmark oil price for North America became so cheap that it went into the negative price range in future markets.

This oil industry bellwether price point — West Texas Intermediate crude (WTI) — dipped to negative $37 per barrel on Monday, viscerally under scoring the devastation the coronavirus pandemic has swept over the frozen world economy.

And Alberta, one of the world’s largest oil producing jurisdictions, is reeling.

Analysts and industry experts see it as a dark snapshot in time that, should the pandemic continue past August, could pummel the province’s industry into an unrecognizable shape and leave hundreds of thousands out of work.

With WTI dropping so low in future trading — meaning contracts trading based on future need, and in this case, for May — Western Canadian Select (WCS) also essentially went into the negative price range, since it is typically priced at a discount to WTI.

On Tuesday, the price for WTI was able to crawl out of the negatives.

There are two markets for oil: a spot market, where actual oil is sold, and a future market (which WTI primarily trades in) where a contract for upwards of 1,000 barrels could be agreed upon for a future date in the following month.

Oil demand has dropped globally so hard that this week contract holders in Cushing, Oklahoma, where much of North America’s oil flows through, scrambled to sell off these May contracts because they had no more storage capacity for incoming oil.

This signals a backup in the entire system, all the way through to Alberta, said Richard Masson, an executive fellow at the University of Calgary School of Public Policy.

As demand dwindles to almost nothing, there’s just not enough capacity at refineries for storage or places for the oil producers to put it, he said.

All over the world, tanks are brimming with the stuff and there’s even firms renting offshore tankers — “floating storage” as Masson calls it — where for around $180,000 per day you can store upwards of 2 million barrels of oil.

Unfortunately for Alberta, there’s not enough pipeline capacity going to tidewater in British Columbia to use this as an option for alleviating pressure, he said.

Firms are moving to cut production, but that can only go down so much, especially in oil projects which would see oil reservoirs get damaged should they shutdown completely.

“We’re going to find that we just have no place to put it,” Masson said.

“So, we’re likely to experience negative prices over the next few weeks because it takes time to slow down production, and demand just dropped off a cliff.”

For June, WTI hovered around $13 per barrel on Tuesday, said Masson. Typically, Western Canadian oil sits at a discount to that price, by around $14 per barrel.

Masson said he’s “been around for a very long time” and that he’s “never seen a big oilsands shut down.”

Husky on Monday cut production by 80,000 barrels a day, and ConocoPhillips said recently it would be cutting 100,000 barrels per day from one of its oilsands projects, said Masson.

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“Those things are unprecedented.”

Should the global freeze on movement stretch into September, things could get “very ugly” in Alberta — mass layoffs, companies shutting down and conglomeration, Masson said.

Premier Jason Kenney didn’t soften the blow when he expressed his thoughts about the negative prices earlier this week: “This strikes right at the heart of the entire Canadian economy,” he said.

“This is not an Alberta issue; this is not an industry specific issue.”

Kenney called on further federal government support for the oil industry, even though environmentalists in Canada oppose a bailout, because the $1.7 billion committed by Ottawa last week to help clean up orphan wells in the west is just a start.

Masson also said that chunk of money is only a drop in the bucket. The industry would need somewhere around $15 or 30 billion in financing, he said. “Activity is just grinding to a halt here,” he added.

While Kenney stressed the crisis of a “permanently impaired” oil and gas industry could mean upwards of 500,000 indirect and direct jobs being lost — the province is also staring over the edge of a cliff when it comes to its own revenues.

Alberta’s last budget rolled out in late February with a “turnaround year” projection from the finance minister. But it’s now “busted beyond belief,” says Moshe Lander, an economics professor at Concordia University.

The province pinned its hopes on oil trading at around $58 per barrel and various pipelines coming online. This would allow for a budget deficit of about $6.8 billion in 2020 with sights set on a surplus by 2023.

Just about two months after the budget was unveiled, these estimates are now nearly worthless for 2020.

“Alberta, for the better part of the last half century, has relied excessively on oil and gas royalties as the main source of revenue,” Lander said.

It has also long been proud of its ability to dodge implementing a provincial sales tax.

But Lander says if Alberta wants to keep up its service level for health care and social service spending, it’ll need to seriously consider one, not in the short term, but in the mid to long term.

“You have to diversify that tax base beyond oil and gas,” he said.

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