Fort McMurray and the Canadian boom-to-bust experience: Don Pittis

Hark Savinsky remembers the boom days when every kid out of highschoolcould walk right into a good job. And the first thing each youngster did after gettingthat job with a littlehelp from the bankwas buy a shinynew truck.

Those days are gone. In fact,they're long gone.

• Clean-energy deal signed in 1st step to green NAFTA
• Oil soars, lifting stock markets to big gains

BecauseSavinsky, who now works at Scotiabank's corporate headquarters inToronto, grew up not in FortMcMurray,Alta., but inAtikokan, Ont. He watched the northern Ontario communityboom, and when the mines closed one after the other, he witnessed its pain as the boom turned to bust.

Fort McMurray is going through the samedifficult process experienced bycommunities dotted across Canadaas the singleindustry they dependedupon sinksfollowing an exhilarating rise.

Party's over

The wealth and sophistication of Fort McMurrayis hard to compare with smaller boom towns, but one common feature isthat the decline is often gradual, as enormous reservoirs of wealth seep out of the community. Aftermany years of prosperity, residentscannot accept that the party is over.

"There was a lot of hope,"Savinskysays of Atikokan,which saw itspopulation shrinkfrom about 7,000 to just over 2,000."And this ispart of the denial, I suppose."

Hecompares thecommunity'sreactionto the stages of grief, where acceptance only comes after denial, anger, bargaining and depression.

It's hard to say what stageFort McMurray is at just now. The talk that everything will be back to normal "after weget the pipeline" may indeedbe part of the denial stage.

But as houses go up for saleand municipal projects grind to a halt, everyone knows that something important has changed inFort Mac as the global price of oil has fallen further and stayed low longer than almost anyone expected.

In December 2014, I quoted one of Canada's top commodity economists who said oil had oversold and would bounce back to $70 US a barrel in 2015. But these days even optimists are losing their smiles.

• Oil price slides to $26 a barrel and stock markets follow crude lower
• Why it's so hard to know when oil will bounce back

Last week, before a Friday rebound andas oil was heading for $26 US,TD Bankissued a report saying world prices were now well belowthe break-even point for the cheapestCanadian heavy oil. At that price, the report said even existing steam-assistedgravity drainage systems, an extraction technique used in the oilsands, werelosing up to $11 on every barrel.

Psychology and economics

According to Greg Halseth, a specialist in the rise and fall andrise again ofone-industry communities,keeping hope alive is crucial as Fort McMurray'seconomy goes off the boil. He says the damage of a long, slow decline is psychological as well as economic.

Halseth, who holds a prestigiousCanada ResearchChair at the University of Northern British Columbia, says boom-and-bust communities share some common vulnerabilities that go back to the fur trade. Theydependon the health and changing values of a much bigger market.

"Canada, as a resource-exporting nation, is what's called by economists a 'price taker,'" says Halseth. "We don't set the price for oil. We don't set the price for copper or gold or any of those things."

The other problem is a lack ofcomplexity. Smaller communities produce very little of what they consume, a common feature of globalizationbutespecially acutewhennot only iPadsand Ford F-150s are produced elsewhere, but milk and bread are as well. So when primary jobs decline, young people, especially, are forced to leave.

The cry goes out for government support butduring a generalized economic decline of the kind we are seeing now, there are too many communities in need and not enough money.

'We spend every nickel'

"When there's a boom, we spend every nickel of it," says Halseth. "And when there's a bust, we don't have the fiscal resources to transform our economy."

Halseth says there are many one-industry communities that have stayed the course,remaking themselves into healthy, diverse communities, albeit at a smaller size.

"They've often done some terrific, tremendous things," he says.

Industries can also bounce back as the rising demand foriron or oil brings a new wave of investment. The trouble isdown-swings in thecycle can stretch out too long, leaving many businesses and homeowners unable to hang on. Some industries neverreturn to their former glory.

As Halseth has witnessed in the West Coast forest industry, even when therebound happened, better technology andincreased efficiency often means the industry just doesn't generateas many primary jobs.

"I think the group that faced more problems were the retirees who had sunk a lot into their houses and, of course with the exit of so many people, house prices plummeted," says Savinsky,remembering the years after Atikokan's iron mines shut down.

He says those people were often forced to stay, even after their children headed out to find work elsewhere.

Savinskyleft town when he went off to university. Both his sisters have also found work in southernOntario. His parents managed to hang on as the last of the three jewellersthe town once had, but finally packed up and moved south to be closer to their children.

He says the man who ran the liquor store in Atikokanalso moved to follow his kids. Like so many in Canadian towns that had gone fromboom to bust, they had transferred their skills to the oil industry and headed to the expandingcommunity of Fort McMurray.

Follow Don on Twitter@don_pittis

More analysisby Don Pittis