Oil dropped below $48 a barrel on Tuesday and the slump at the pump is having an effect on the bottom line of energy companies and local businesses.
Tuesday’s price was the lowest in over five years and that has oil companies trimming expenses and tightening resources.
The low prices are also affecting businesses all across Calgary and Calgarians appear to be spending less on luxury goods.
Staff at Manuel Latruwe Belgian Patisserie and Bread shop have noticed the change.
“It affects the small retailers such as myself, that people spend less money on everything and it trickles down to food sales so people even reducing their spending on baked goods I’d say,” said Manuel Latruwe.
Latruwe says the drop in sales of baked goods has been offset by an increase in cheaper frozen items and he thinks people are trying to stretch their dollar. “People still want to treat themselves and want to do things themselves at home and try to save money this way.”
Some economists say consumer confidence in Alberta is dropping along with the price of oil as many people worry that job cuts are coming.
In Calgary, Ziff Energy's Bill Gwodz plots the cost of oil production against the price per barrel and says most energy companies can survive fifty dollars per barrel, though not without trimming costs.
“It's really tough and in fact you’re going to find that some service sectors, restaurants, hotels will have less business because there’s less people going to them,” said Ziff.
Mount Royal University professor Ben Atkinson says it is Economics 101.
“If the oil prices drop, incomes within the oil industry go down so therefore they will spend less money at restaurants and the baker and therefore, the baker and the restaurants income goes down and therefore they'll spend less money,” said Atkinson.
One of the biggest hits to Albertans from low oil prices could be felt in this spring's provincial budget and the premier says that the budget will contain severe cuts to services and spending as a result.
(With files from Kevin Green)
