Recession, commodities and the oil sands

Maybe you thought the Canadian economy was relatively shielded from the panic and nonsense going on in the U.S. right now, because our financial services sector and our mortgage lending policies weren’t quite as batshit insane as they have been south of the border. If you did, you thought wrong: the commodities sector — stuff like mining, oil and other natural resources, i.e., the backbone of the Canadian economy — took a shellacking on the markets Thursday on fears that an economic downturn would dry up demand. Even oil prices could be affected: one analyst thinks that the price of oil could drop below US$50 a barrel. (It’s still above US$90 now.)

Now that’s interesting, because, according to the Wikipedia article on the Athabasca oil sands, it costs between $36 and $40, Canadian, to turn bitumen into a barrel of synthetic crude. Profits at US$50 a barrel would be something on the order of 16 to 27 percent. At some point near or below US$50 a barrel, oil sands production would cease to be profitable. And then things would get very interesting in Alberta.

So what was that about the fundamentals of the Canadian economy again?