Businesses beyond the oilpatch taking crude price slump in stride

CALGARY – For International Motor Cars, a luxury dealership in Calgary, the oilpatch is big business.

But as crude prices have shifted into a lower gear, so too has demand for posh rides from energy industry customers, said general sales manager David Baker.

Baker figures the dealership has sold 30 per cent fewer cars this year compared to 2013.

“I believe it’s in direct correlation to the oilpatch,” he said.

Crude for January delivery fell to around US$66 on Friday — down more than a third since the summer — a day after the Organization of Petroleum Exporting Countries said it would maintain its output of 30 million barrels per day rather than cut production and put a floor under prices.

The previous day, the Alberta government predicted that crude prices would hover at around $75 for the remainder of the fiscal year, and warned of “tough decisions” if oil stays at that level.

Still, the chief economist at one of Western Canada’s biggest financial institutions is not raising the alarm.

ATB Financial’s Todd Hirsch notes that the industry is “a dog that wags an awful lot of tails” in Alberta.

“A lot of business services, a lot of personal services aren’t really captured by Statistics Canada as (part of) the energy sector, but they really are quite often times heavily dependent on energy spending and investment,” he said.

Hirsch expects the recent price drop may lead to some pullback in Calgary, the white-collar heart of Alberta’s oilpatch, when it comes to luxury retail items, discretionary travel and corporate expense accounts.

Baker agrees there is no need to panic, saying that while car sales have been fewer in number, they have been fetching higher prices.

“I’ve been selling vehicles in the province of Alberta for 40 years, so I’ve seen the ups and the downs of oil, I’ve seen the ups and downs of interest rates,” Baker said. “And even though our sales from last year are down, it is still way stronger than it was in ’09 and ’10.”

Event planner David Howard has also noticed the shift but says that, while business is down about 10 per cent this year, it doesn’t compare to the financial crisis of four or five years ago — when oil prices plunged to half of where they are today — and business was off 50 per cent.

“I don’t think that the panic button has been pressed yet,” said Howard, president of The Event Group in Calgary.

While some clients are looking at ways to cut costs at upcoming holiday parties, none are being cancelled since most would have booked their soirees and put down deposits months ago.

But instead of providing unlimited free drinks, some clients are economizing by opting to set up a cash bar or provide a bottle of wine or two at each table. And rather than a four-course meal, perhaps three is enough. Firms might have local acts provide the entertainment rather than book a headliner.

On the other hand, Howard is already seeing an impact when it comes to events he’s planning for next year’s Calgary Stampede, the 10-day celebration of cowboy culture that dominates the city every July.

“We’ve had actually one that cancelled altogether and then we’ve had another that cut the budget in half,” he said.

Meanwhile, the drop in oil prices has been more positive than negative for Ralph’s Motor Sports, which has been selling snowmobiles and all-terrain vehicles in Calgary for more than four decades.

It’s less expensive these days to haul the machines to the Rockies and fuel them up, said sales manager Rick Stewart.

“Our sales have increased about 35 per cent I would say for our mountain machines and I think it’s because the price of gas is down,” he said.

It all adds up to what the ATB’s Hirsch expects will be a bit of a pause in 2015 — not a bust.

“A little bit of recalibrating of our expectations might be just what we need,” he said, adding that it may bring a “bit of reality” back to a city and a province where expectations “can get a little bit unrealistic.”

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