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Oil and gas producers in Alberta may very well be facing their toughest challenge to date, as the price of Western Canadian Select closed at US$5.29 Wednesday.

Experts have attributed the price drop to the ongoing COVID-19 pandemic, as well as a production war between Saudi Arabia and Russia.

Although no curtailment or production limits have been set by the government, oil analysts said that companies are beginning to self-impose limits to weather the storm.

“At this price, nobody wants to bring oil to market that they don’t have to,” Auspice Capital Advisers president Tim Pickering said Friday.

“But that is going to put immense pressure on storage levels in Alberta, across Western Canada and across North America.” Tweet This

According to some experts, for Alberta to maintain a production level of 1.5 million barrels per day like in 2019, producers need the price of West Texas Intermediate to be much higher than US$20 per barrel, including an extra US$2 to US$5 to sustain capital costs.

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On Wednesday, WTI closed the day at US$21.20.

In response to the record low prices, oil companies in Western Canada have begun cutting capital expenditures and temporarily laying off workers in northern Alberta.

According to the Canadian Association of Petroleum Producers, energy companies cut more than $6 billion in capital expenditures in March 2020, which is a 25 per cent reduction from its forecast in January.

Although Alberta’s oil patch usually experiences seasonal layoffs at this time of year for what’s called the spring break up, there are concerns those jobs won’t be available after the ground thaws.

“Last week I got notified and it was a mix of what’s going on with COVID-19 and also obviously the oil prices right now,” laid-off oilfield worker Michael Grierson said.

“We were told to stay hopeful here to get going back again by the first week of May, but that’s all up in the air.” Tweet This

Terry Parker with Building Trades Alberta said that his organization is hearing of layoffs, but more so that companies are not recalling staff for the seasonal turnover.

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“The economy was basically relying on a lot of this work out there, and because it wasn’t happening, there’s a lot of people who are going to be on EI or have to remain on EI,” Parker said.

READ MORE: Oil price crash expected to hit thermal oilsands production in Western Canada

There is also concern about the scope of the impact low oil prices will have on provincial oil royalties.

“It really highlights that the government needs to be seriously risk management programs to hedge the downside commodity risk and low commodity risk, as oil companies often do, as a way to provide more certainty for cash flows for the province,” Pickering said. Tweet This

Organizatons like the Calgary Chamber of Commerce are pushing for fast-tracked innovation across several sectors to help with declining revenues.

On Tuesday, the chamber released a series of policy recommendations for the short-, medium- and long-term recovery of the provincial economy.

The recommendations include assurances to maintain labour for supply chains, an economic task force and Canadian tax review, exporting Canadian intellectual property as well as commitments to economic diversification and innovation.

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“This is really an opportunity for us with our base industries like agriculture, oil and gas, health sciences, and supply chains to really embrace innovation as a form of revenue for the government,” Calgary Chamber of Commerce CEO Sandip Lalli said.

“Innovation is the way we make markets globally.”

–With files from the Canadian Press