Oil prices have been spiking at their highest level since the recession as unrest in several Middle-East countries spooks commodity markets. How this impacts Alberta depends largely on how long the increases last.
February 24, 2011
by DAN SUMMER
CALGARY: Oil prices have been spiking at their highest level since the recession as unrest in several Middle-East countries spooks commodity markets. How this impacts Alberta depends largely on how long the increases last.
If the instability continues, it could be good for investment in Alberta.
As of Feb. 23, West Texas Intermediate (WTI) crude oil for delivery in March traded at over $97 per barrel, up $14 in one week. Behind the rise in prices is rioting, which began in Tunisia but has since spread to Egypt, Bahrain and most recently Libya (the world’s eleventh largest exporter of oil).
The real concern for oil markets is whether the strife will spread to other countries such as Iran or Saudi Arabia. If that happens oil prices will get even crazier.
On the other side of the equation, natural gas prices are not so subject to geopolitical risk because gas tends to be produced and consumed locally (although that is changing slowly). As a result, North American natural gas prices have barely moved over the last week.
So far, the spike in prices is unlikely to have a major impact on drilling or investment in Alberta, since prices take time to filter through and generate economic activity. However, the upside to the turmoil in the Middle East is Alberta’s relatively geopolitical risk-free oil plays (particularly the oil sands) will look even more attractive to global oil companies.
Dan Summer is a financial economist at ATB Financial, an Edmonton-based Alberta financial institution. Distributed by Troy Media.