The last few months must be frustrating times for local oil producers.
It’s obviously a much rosier situation than what they encountered 18 months ago, when the price of oil was hovering around the US$30 per barrel mark, and we were wondering whether it had reached the rock bottom point.
But for the past year, oil has been around US$50 per barrel. There have been times in which it has eclipsed the US$55 per barrel mark, and there have been times when it’s been below $45 per barrel.
But it has been pretty consistent at these present levels, and now the question is when the next price breakthrough will come.
There is more optimism in the oil and gas sector than there was 12 months ago, and especially 18 months ago. Companies have been hiring, although you can understand why people might be skittish about getting back into the oil industry after the layoffs and uncertainty of recent years.
The drilling forecast for the Petroleum Services Association of Canada indicates that companies are more willing to get back into the field. And the Conference Board of Canada is projecting that the Western Canadian provinces will regain their perch as the leaders for economic growth in Canada.
Several pipelines in Canada and the U.S. have also been approved, which will help more oil get to the market. Enbridge’s Line 3 and Trans Mountain’s Kinder Morgan pipeline expansions have been given the green light, although the current political uncertainty in B.C. has cast doubt on the future of Kinder Morgan.
With the exception of Kinder Morgan’s uncertainty, though, there are positive indicators of an industry that is on the rebound, rather than one that is stagnant or in decline. The oil and gas sector appears to have weathered the worst of the price slump, and can now look forward to better days in the future.
The last three years have demonstrated the resolve of the energy sector, and the companies that are proud to be part of it. Some of them closed up their offices in southeast Saskatchewan, but others have remained here, and are looking forward to the day when their patience will be rewarded.
But the energy sector won’t be thriving at US$50 per barrel. We likely need to see oil eclipse, and stay above, the US$60 per barrel mark before companies will be willing to spend money, for the hotels to be full again, for workers to be eager to head back to the oil sector en masse, and for governments to be collecting royalties from the oil that is sold.
We likely won’t see $100 per barrel oil for a long time to come. Expectations have to be tempered. Rather than hoping for a return to the bonanza days of 2008 or 2012, we have to be content with a price of oil at the levels seen in 2006 and early 2007.
Oil companies and oilfield workers were making pretty good money back then, too, and the government was reaping good royalties as well.
But it’s not easy playing the waiting game for $60 per barrel oil.
