Future of oil prices a mystery in short term: expert

Everton McLean
Send to a friend

Send this article to a friend.

Energy/politics

Several economists, oil industry representatives and the province's finance minister talked about the price of oil at the St. John's Board of Trade Business Development Summit Thursday, and the consensus is ... there's no consensus on where prices will go.

Gerry Protti, chairman of the Canadian Association of Petroleum Producers, said that a few months ago - when oil cost about $144 a barrel - $44 per barrel oil seemed impossible.

Canadian Association of Petroleum Producers chairman Gerry Protti delivers a speech at St. John's Board of Trade conference Thursday. He said oil prices are difficult to predict, but he expects the demand for hydrocarbon to continue for many decades. Pho

Several economists, oil industry representatives and the province's finance minister talked about the price of oil at the St. John's Board of Trade Business Development Summit Thursday, and the consensus is ... there's no consensus on where prices will go.

Gerry Protti, chairman of the Canadian Association of Petroleum Producers, said that a few months ago - when oil cost about $144 a barrel - $44 per barrel oil seemed impossible.

That goes to show how volatile prices are, and, as a result, how easily affected the province's revenues can be.

"When you talk about the future of the oil industry, I don't think you could think of a worse time to come up with projections and prognostications, because there's so much turmoil out there," he said.

However, Protti said that in the long run, petroleum is expected to continue to be in high demand and prices should rebound.

That means longer-term projects, such as Hebron in this province, which isn't expected to produce oil until 2017, will not really be affected.

"No one expects this (low price) curve to continue," he said.

Protti wouldn't give an estimate on where he expects prices to go in the short term, but Royal Bank of Canada assistant chief economist Paul Ferley said in his presentation oil is predicted to increase in prices in 2009 to more than $55 per barrel, and more than $70 per barrel in 2010.

Good for province

That's good news from this province's perspective, said Protti.

He said oil production is "clearly a big driver of the gross domestic product in Newfoundland and Labrador, (representing) 35 per cent (of it)."

He said the expansion of the southern arm of the Hibernia oil field, reaching more that two million extra barrels of oil, as well as expansions in the Terra Nova and White Rose fields, also bode well for the oil industry here.

Natural gas development also has a future in this province in the long term, he said.

Finance Minister Jerome Kennedy reiterated the importance of oil to the provincial coffers.

He said he's been looking at financial models using possible average oil prices as the government tries to look into the next year, but he said outlooks based on those averages are still not firm because the amount of oil production will also factor into overall revenues.

However, he said, even at $60 per barrel, the province will dip into deficit territory.

And he's pessimistic that prices will even go that high that fast.

"Personally, I don't see it getting to $60 right now," he said.

emclean@thetelegram.com

Organizations: St. John's Board of Trade Business Development Summit, Canadian Association of Petroleum Producers, Royal Bank of Canada

Geographic location: Newfoundland and Labrador, Terra Nova, White Rose

  • 1
  • 2
  • 3
  • 4
  • 5

Thanks for voting!

Top of page

Comments

Comments

Recent comments

  • Bern
    July 02, 2010 - 13:15

    Funny, nobody could see a recession comming, but now they know everything.

  • Bern
    July 01, 2010 - 19:55

    Funny, nobody could see a recession comming, but now they know everything.