The Kenney government in Alberta is looking to extend low-credit loans to failing oil and gas corporations. Fears of an economic downturn due to the coronavirus pandemic, as well as a price war between Russia and Saudi Arabia have left Canadian oil prices below $20.

Alberta Premier Kenney told reporters that his government is “looking at setting up a credit facility that would allow for access to credit at lower rates of interest for highly distressed companies.”

The oilsands had already obtained significant stimulus prior to the coronavirus crisis. Last year, the UCP government rolled out a $4.5 billion corporate tax cut that helped fossil fuel corporations expand their profits. Earlier this month, Kenney also announced a $100 million loan to the Orphan Wells Association, the oil and gas industry group that is responsible for cleaning up abandoned oil sites.

With cheap oil becoming the new normal, some are wary about the need for an oil bailout, Megan Greene, an economist with the Harvard Kennedy School, compares it to a bad investment. She was referring to a potential bailout in the United States, but the same applies -perhaps even more so- to an Alberta bailout.

I still don’t think a bailout of the oil patch is necessarily a good idea. Investors took a risk, and sometimes those risks go south. And if $30/barrel oil is the new normal, it is just throwing good money after bad. https://t.co/zoGN0mJtgh — Megan Greene (@economistmeg) March 16, 2020

Analysts estimate that the current low oil prices will be the norm for the foreseeable future. With oilsands products being some of the costliest to produce, there are questions about whether the industry will remain economically viable.

The Alberta government appears to be willing to double down on a dwindling sector at a time when government resources will have to be carefully allocated to both combat a pandemic and mitigate its economic fallout.

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