The Globe and Mail

Why oil (not cars) drives the economy

By Barrie McKenna

The oil price spike is producing a typical showdown between energy producers and consumers. But this isn’t a return to 1980, when Ottawa tried unsuccessfully to shift wealth from drillers to guzzlers via the National Energy Program, setting up a brawl between Alberta and the rest of Canada.

This time, the entire country has evolved into a petro-dollar economy. Canada's fortunes – and its currency – are now more closely tethered to oil than any other industry, including autos, forest products or agriculture.

Vast swaths of the Canadian economy thrive when the price of crude is high, and not just in Alberta’s oil patch. From steel fabricators in Quebec and Ontario, which supply Western Canada’s giant oil sands projects, to Newfoundland oil workers to investors everywhere, $100-a-barrel crude means more work, and more wealth.

The oil and gas sector is now the dominant industrial contributor to Canada’s economy, and by a wide margin.

Drilling technology sparks a new oil boom

By Shawn McCarthy

Gary Williams recalls the last time the oil industry showed up in his tiny town of Waskada, Man. Crews punched holes in the prairie ground, then disappeared as suddenly as they arrived when those holes came up empty.

But that was 30 years ago. This time, it’s different. Armed with new drilling technology and eager to reap the rewards of oil’s high prices, companies are tapping complex geological formations, and the crude is flowing, adding Manitoba to Canada’s list of significant oil-producing provinces.

“It’s just a huge boost for the economy in the area,” said Mr. Williams, the town’s mayor. “We were sending our young people to Alberta for the last 10 years and now the trend is reversing and we’re seeing a lot of Alberta people here and some of our people are coming back.”

The oil-drilling boom promises what one company executive calls a “quiet revolution” in the industry. It could reduce the U.S. appetite for imported oil – including, potentially, from the oil sands. And the technological breakthrough could put the brakes on future price increases by bringing new, relatively low-cost supplies to the market – not just in North America but around the world.

How will Canadian companies deal with $100 oil?

By Nathan VanderKlippe and Carrie Tait

The threat of triple-digit oil was once enough to strike fear in the hearts of consumers -- and oil executives, who worried that it would cause economic destruction.

Now, a global recovery has pushed the European oil price above $100 (U.S.) a barrel. North American crude is expected to follow, and the world has begun to reckon with the prospect of a prolonged stretch of high energy prices.

All the signs are there. China is building enough tanks to store 100 days of crude. India is building its own stockpile storage capacity -- and those two countries’ ambitions sit on top of the continued strength in Asian demand. And it’s not just overseas: Some believe the U.S. economy could grow by as much as 4 per cent this year. Growth in the United States, still by far the world’s largest user of crude oil, will also help to drive oil consumption.

Taken together, these signs portend a future where high oil prices are an economic fixture. That future carries huge implications for Canada, a country where energy forms more than a quarter of all exports.

So what will a return to $100 crude mean to the industry that extracts and ships it? The Globe and Mail asked 10 top executives at a cross-section of oil and gas companies for their thoughts. Their answers, edited for space and clarity, reveal a remarkable diversity of thought.

Price gap hits Canadian oil firms

By Shawn McCarthy

Canadian oil producers have been left watching from the sidelines as global crude prices soar well above $100 (U.S.) per barrel because of concerns about political unrest in the Middle East and rising imports from China.

While crude oil is typically seen as an international commodity, local market conditions have resulted in a widening gap between West Texas Intermediate – the trendsetter for Canadian oil prices – and international crudes such as North Sea Brent.

Brent prices jumped more than 2 per cent on Monday – briefly topping $104 (U.S.) per barrel – to settle at $103.88 per barrel. Protests in Yemen, Bahrain, Algeria and Iran stoked fears about the reliability of supplies from the oil-rich Middle East and North Africa, while China reported strong oil import numbers.

In contrast, WTI lost 77 cents to $84.81, its lowest point since early December. The last time global crude prices rose above $100, WTI moved in virtual lockstep with international grades.

Why Saudi Arabia can no longer temper oil prices

By Jeff Rubin

What’s easy to lose sight of in the chaos sweeping through the Middle East is where oil prices were trading before it began. The Brent futures contract, the world’s new benchmark oil price, had already broken $100 (U.S.) a barrel before protesters in Cairo started sweeping into Tahrir Square and demanding Hosni Mubarak’s head. And the price of West Texas Intermediate CL-FT, laden as it is with record inventories of Bakken oil and Canadian oil sands crude piling up in Cushing, Okla., was trading just shy of $90 per barrel.

These are the kind of prices that one might expect to encounter at the end of an economic cycle, not at the beginning of one. But world oil demand once again grew at lot faster than the oil experts at the International Energy Agency were expecting – almost twice as fast, to be precise.