By Ketki Saxena
Investing.com -- The rampant wildfires spreading across Canada's primary natural gas-producing region could potentially reduce the country's gross domestic product (GDP) growth by 0.2% to 0.3% in May, according to an estimate from a top economist at Bank of Nova Scotia (TSX:BNS). This reduction is contingent upon much of the area's output remaining closed for the month.
Derek Holt, head of capital markets economics, acknowledges that this projection is subject to change as more shutdowns are announced due to the fires' impact on Canadian economic statistics. In a note sent out on Tuesday, he stated, "We're getting into the high single-digits of Alberta’s total oil output that is being shut-in, and oil and gas account for about 5.3% of monthly Canadian GDP."
Holt also mentioned how these wildfires have affected prices such as Alberta hub natural gas and Western Canada Select crude oil prices which have been rising since the start of fires and subsequent shutdowns.
Prior to these events, it was anticipated that Canada's economic growth would stagnate mid-year as rate hikes initiated by their central bank slowed down activities. However, Holt believes this production shock should not impact monetary policy since rebounds are expected along with potential rebuilding efforts following disasters like these wildfires.
As per recent reports from Alberta officials at around 8:25 AM Mountain time last week there were still around 89 active wildfires with nearly one-third being uncontrolled; however, those numbers had dropped slightly compared previous days when more than a hundred total active fires were recorded over Monday alone.
These fires have led to the suspension of at least 234,000 barrels per day in oil production which has caused low-sulfur sweet crude prices within Canada to reach a one-year high. Additionally, around a fifth of the western Canadian natural gas supply has been disrupted resulting in an increase for those energy costs as well.
Canadian Prime Minister Justin Trudeau confirmed that official assistance requests have been received from Alberta Premier Danielle Smith and her government. Discussions are currently ongoing regarding how best to respond while resources are being mobilized as quickly as possible.
Trudeau assured Canadians during an Ottawa press conference saying, "Over the past number of days, federal resources have been stood up and made ready for what we expected to be a request for assistance. We're going to be able to be there for the people of Alberta."