Don Newman

December 2, 2021

These are good days for the oil industry.

After six years of doom and gloom the economic recovery from COVID-19 is sparking a recovery in general and leading to higher crude oil prices.

In recent days the discovery of the Omicron variant and fears of its potency have rattled markets and sent the price of oil below US$80 a barrel. But until the Omicron headlines, the US price of trend setting West Texas Intermediate (WTI) was above $80 – a very welcome occurrence from levels that sunk into the $30 range during the past six years. Western Canadian Select (WCS) is usually discounted about 15 percent from WTI and, sure enough, averaged US$69.30 in October 2021, up 122 percent from a year earlier.

Energy prices are part of the economic factors being blamed for the highest inflation in almost two decades. Although at 4.7 percent the current inflation rate doesn’t seem all that scary for people who lived through the last three decades of the 20th century. However inflation is over twice as high as the Bank of Canada’s inflation target rate of 2 percent annually and the energy portion of it is showing up when people fill their cars or pay their home heating bills.

The higher prices mean higher profits for energy companies. practices that once seemed routine for many. In the most recent quarter, some companies were increasing both their dividend payouts and expanding their share buy back programs to disperse more of their increased revenues to shareholders.

As well, to lessen their suddenly higher tax liabilities, some companies are acquiring other oil and gas producers. For some it seems like the good old days again.

That doesn’t mean that happy days are forever back for oil and gas in Alberta, Saskatchewan and the Newfoundland offshore. The federal government still plans to cap over all production at current levels, the carbon tax will continue to increase annually until 2030 and perhaps beyond, the push to develop electric cars is intensifying and everything Green is priority one.

But after an unremitting deluge of bad days, at least for now, these are good days for oil and gas.

Contributing Writer and columnist Don Newman, an Officer of the Order of Canada and Lifetime Member of the Parliamentary Press Galley, is Executive Vice President of Rubicon Strategy, based in Ottawa.