Sustained high oil prices could provide a much-needed boost to Alberta’s oil sector, say economic experts..“If oil is at $100 a barrel, that’s a fair bit of money and good news for the Canadian economy. The oil producers in Alberta are now smiling in their sleep,” said Jean-Thomas Bernard, an economics professor at the University of Ottawa..Russia’s invasion of Ukraine in late February pushed already high oil prices into the stratosphere. The price of Brent crude — the global benchmark for prices — skyrocketed to over $120 a barrel, a 14-year high..The price of oil dropped back down below $100 a barrel shortly after. But as the Western Standard previously reported, western countries cutting off Russia’s oil exports completely could lead to a five million barrel shortfall, potentially pushing oil prices to $200 per barrel.. Experts warn Alberta oil price boom could be threatened by volatility .Chart courtesy of OilPrice.com.Bernard said Canada could take advantage of increased global demand for oil, but only if more pipelines were built to transport it. .“We have had a lot of pipeline proposals over the last 15 years. But on the east coast, we don’t have the export capacity,” he said. “Right now, Europe would like to get some freedom away from Russian and oil and gas.”.Europe has signalled its intention to shift away from Russian energy, while the United States announced on March 9 that it would ban the import of Russian oil..On March 14, Natural Resources Minister Jonathan Wilkinson said Canada is ready to ramp up oil exports to the U.S. and Europe to offset reduced imports of Russian energy..“In the context of the discussions, not just with the Americans, but the Europeans as well, we have essentially asked each other, those of us that are oil and gas producers, to look at whatever we can do,” he said..Chetan Dave, an economics professor at the University of Alberta, said he believes higher oil prices will be a “net positive” for Alberta’s oil sector, but price volatility will lead oil companies to tread carefully. .“I can imagine the oil sector will get a bunch of revenues, but I don’t see them spending it anymore because it’s so volatile,” he said. “They will try to sit on the cash until there’s some semblance of non-volatility that takes place.”.Dave also predicts the world can expect to see oil prices remain volatile throughout 2022. And because oil is a “key input” in many aspects of the global economy, such as transport, agriculture, and plastics, he said higher prices will also exacerbate supply chain shortages and inflation..Trevor Tombe, an economics professor at the University of Calgary, said the longer-term price increase of oil can be attributed to a stronger than expected global recovery from COVID-19, combined with OPEC countries not ramping up oil production..“Of course, then the Russian invasion of Ukraine led to a pretty rapid spike. We’re also seeing much, much higher levels of volatility. We even saw it today with energy prices falling dramatically,” Tombe said in an interview with The Western Standard on March 15. .Since Canada is the world’s fourth-largest oil producer, Tombe said higher oil prices would have a positive effect on the country’s GDP, “especially so in Alberta.” But he agreed that going forward, Canadians should expect the price of oil to remain volatile..Matthew Horwood is a parliamentary reporter for the Western Standard based in Ottawa
