The start of the 2016 fiscal year brings with it not only the lowest price per barrel of crude oil in the past five years, but also a significant increase in Canada’s tourism industry. Seemingly unconnected, the increase in tourism is related to the petroleum industry’s steady decline in oil prices. From a real, regular gasoline retail price per gallon in 2014 of $3.40, $2.40 in 2015, and now $2.04 in January 2016, average gasoline retail prices in the United States have seen a 40 percent price drop. The price drop can be attributed to an increasing surplus of crude oil due to American domestic oil production increasing to become the world’s top oil producer in 2014. The United States produced 12.5 million barrels per day in 2014, putting Saudi Arabia second at 11.6, and Russia at 10.8.
“We believed we could reduce our dependence on foreign oil … and today, America is number one in oil and gas,” stated President Barack Obama during his 2015 State of the Union Address.
With a lesser need to import foreign crude oil, an increasing surplus of crude oil has accumulated in the international market, driving down the price of oil.
In Canada, the oil industry serves as one of its most important primary sectors, in addition to being the world’s fifth-largest producer of natural gas and crude oil. Therefore, it is no surprise that the depreciation of the Canadian dollar correlates with the decline in oil prices. Changing from an almost even 1:1 exchange rate in 2012, the loonie now sees itself at 70 American cents per Canadian dollar in January 2016. The value disparity, however, encourages Americans to migrate north and vacation. Vancouver, Canada experienced a record breaking year, with 9.4 million visitors, and Montreal-area hotels saw a profit increase of more than nine percent from the previous year.
“We’re getting more reservations at the last minute from Americans planning trips for the weekend,” says Head of Hotel Association of Greater Montreal Eve Pare.
The beginning of 2016 may not bode well for the oil industry as gas prices continue to drop. However, Canada’s tourism sector may see an auspicious boom as Americans go loony over the low Canadian dollar.