Oil prices are too high even for those in the oilpatch
Pump prices remain at record levels across Canada, while value of oil climbed to levels not seen since 2008
There's little doubt left that fuel prices are too high when even oil companies aren't happy with how much it costs to fill up a tank.
Prices at the pumps remain at record highs across the country, while oil climbed in value this week to levels not seen since 2008.
The invasion of Ukraine and subsequent sanctions against Russia have sent energy prices soaring, resulting in record levels of revenue for the Canadian oilpatch. But energy executives and politicians gathered in the U.S. for an industry conference noted these kinds of spikes aren't to be celebrated and instead pointto the need for more security and possibly evena NATO-style energy alliance.
"I don't think anyone in industry is excited about $130 oil, especially under these circumstances," said Anne Bradbury, CEO of the American Exploration and Production Council, which represents the largest independent oil and natural gas producers.
The sentiment was echoed by others in the industry who have gathered in Houston, Texas, forCERAWeek, one of the largest energy conferences in the world.
Higher oil prices can have negative impact
Tristan Goodman, president of the Explorers and Producers Association of Canada,said the sector prefers prices between $40 and$100 US per barrel.
"The industry it doesn't like prices on the extremes," he said. "These prices actually do have a negative impact on a number of individuals, many of which are actually friends, family, neighbours, communities."
Higher prices at the pumps are also reflected withan increase in the cost of food and other products and services across the economy.
The longer fuelstays at inflated prices, the higher likelihoodthat people might re-think their summer travel plans, said Helen Currie, chief economist with oil producer ConocoPhillips.
"We could end up trimmingour demand outlook for this year," she saidwhile on stage at a CERAWeek event.
The Canadian oilpatch is currentlygenerating record levels of revenue, which is offsetting debt accumulatedduring the pandemic.
Oil prices fell sharply on Wednesday after a representative of the United Arab Emiratessaid OPEC should increase production of oil. Hours later, the country's energy minister disagreed, but the price of oil in North America had already crashed by more than 10per cent.
Still, oil prices remain above $100 per barrel and the value of other commodities like natural gas and coal are also stillsky high.
U.S. wants more oil produced, now
U.S. Secretary of Energy Jennifer Granholm made it clear at a CERAWeek event Wednesday that her government wants theAmerican oilpatch to move swiftly to ramp up production.
She saidthe U.S. is on a "war footing" and a bigger supply of oil is neededto ease a brewing energy crisis.
"That means releases from strategic reserves across the world, like we've done. And that means you producing more right now, where and if you can," she said, during a speech in front of a packed room.
While oil supplies have been disrupted because of sanctions against Russia, consumption of crude is on the rise because economic activity has begun to ramp up as the pandemic eases.
In its most recent report, credit ratings agency Morningstarprojected thatdemand for oil around the globe wouldkeep climbing until about 2030, "with demand decreasing gradually after that."
Climbing prices mean cash for Alberta
West Texas Intermediate (WTI), the North American benchmark, began the year worth about $75 US per barrel, and climbed to about $130 at one point this week.
Regular gasoline prices across Canada are averaging just under $1.90 per litre this week, compared to around $1.25 per litre one year ago, according to Natural Resources Canada. In Vancouver, the average price is $2.12 per litre.
The Alberta government is projecting a modest surplus this year based on the budget it released last month, but Premier Jason Kenney admits the windfall from oil revenues will likely result in billions of dollars more.
"We're not going to count our chickens before they're hatched," he said duringan interview in Houston."But if we do end up with significant surpluses, we need to pay down the debt."
Every one dollarchange in the price of a barrel of oil results in $500 million for the province.
If oil prices average $80 this year, it's an extra $5 billion; for an average of $90, it's $10 billion; and for an average $100, it's an extra $15 billion.
Calgary-based energy consultancySproule is forecasting WTI to average $93 US for the remainder of 2022. That projection was released two weeks ago before the most recent price spike.
"One thing we know about commodity prices is they are famously unpredictable," he said.
WATCH | What is the Ottawa willing to do about gas prices?
NATO-style energy alliance
Considering the renewed emphasis on energy security, a Calgaryoilpatch executive is proposingthat countries band together around energy just as they have joined military forces under NATO.
That could ensure countries support each other with reliable sources of energy and no longer import oil and natural gas from countries like Russia, Martha Hall Findlay, Suncor Energy's chief climate officer and a former Ontario Liberal MP, told an audience from the stage at the CERAWeek conference.
In an interview, she said countries banding together on energy makes sense as the past few weeks havedemonstrated how effective financial and energy sanctions can be.
"Why are we not actually talking about an energy alliance, an energy-based alliance among like minded countries?"
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