Lauren Krugel, THE CANADIAN PRESS

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CALGARY - Alberta is headed for a dramatic economic slowdown as the province's vital energy sector ratchets down exploration, drilling and expansion in the face of US$50-a-barrel oil, an economist said.

Crude prices dipped below $50 per barrel on the New York Mercantile Exchange Thursday for the first time in more than three years, carving about two thirds off the commodity's record of US$147, reached less than five months ago.

Robert Kavcic of BMO Capital Markets is predicting a meagre 0.3 per cent growth rate in the province next year - the lowest since 1986, when oil prices were also at low levels.

And he's calling for a 1.1 per cent increase in employment next year.

"That in itself isn't bad, but relative to the last four years in Alberta that's a pretty drastic change," he said, noting that the province has gotten used to job growth of as much as five per cent a year.

Other evidence of a slowing Alberta economy includes a significant cooling of the once red-hot housing market and a marked decrease in consumer spending.

"Actually, the province is trailing the country now in retail sales growth, which is also a drastic change in the past three or four years," Kavcic said.

On the Toronto Stock Exchange Thursday, energy stocks tumbled 14.5 per cent - their lowest level in four years - on a day when the main index was down about nine per cent.

The sharp slide in commodity prices, compounded by limited access to credit to finance projects, has caused many oilpatch players to scale back big projects and slash their spending.

The partners in the Fort Hills oilsands project - Petro-Canada (TSX:PCA), UTS Energy Corp. (TSX:UTS) and Teck Cominco (TSX:TCK.B) - announced earlier this week that they're going to put off a final decision on the mining portion of the development into next year and are shelving its accompanying $10-billion upgrader indefinitely.

Suncor Energy Inc. (TSX:SU) is spending about a third less next year than this year as it delays work on its Voyageur upgrader.

And decisions on future expansions to Nexen Inc. (TSX:NXY) and Opti Canada Inc.'s (TSX:OPC) joint Long Lake oilsands project as well as Royal Dutch Shell's (NYSE:RDS) Athabasca oilsands project have also been deferred.

Edward Jones analyst Lanny Pendill said he expects to hear about more cuts to next year's budgets if oil continues to trend downward or even stays at its current levels.

"And that's going to be across the board. You'll see it from the oilsands producers. You'll see it from the conventional producers," he said.

But Pendill does not expect a repeat of the oilpatch bust of the 1980s, when prices were also at dismal levels.

"I think today's environment is entirely different than that environment, primarily due to the underlying fundamentals," he said.

"If you look at what's going on right now, it's a cyclical pullback. It's, in my mind, short term in nature and a lot of it has been driven by this financial crisis that we're seeing."

Once the credit crisis is resolved, demand for oil, especially in emerging economies, will ramp back up. That will pinch supply and eventually drive prices back up - probably into the US$75 to $100 a barrel range, Pendill said.

"It's really hard to pinpoint exactly when that turning point's going to be and we're only going to know it when it's in the rear view mirror," he said.

The Petroleum Services Association of Canada is expecting 300 fewer wells to be drilled in Canada in the first quarter of next year than in the same 2008 period, said association president Roger Soucy.

"I think it's going to be challenging for the whole of the industry. All of this starts with our customers," he said.

"They're the ones that are the direct recipients of the commodity prices and will generate field activity based on the economic conditions that the commodity prices will provide them."

The Alberta government said this week it would rejig its new royalty framework, set to come into effect in the new year, for certain new wells. It was a bid to encourage drilling in the province, which has been weakened by low commodity prices and tough credit markets.