CALGARY — Oil industry profits this year are expected to be 24 per cent lower than in 2008, but its prospects are expected to brighten next year as the global economy recovers, the Conference Board of Canada predicted Wednesday.
“The Canadian oil industry has long been a boom or bust industry, and that has been the case over the past year,” said Todd Crawford, an economist with the Ottawa-based economic think-tank.
The Canadian oil industry’s pre-tax profits are estimated to drop this year to $11.6 billion, down from $15.3 billion in 2008.
The price of crude oil touched record highs above US$147 a barrel last July, only to shrink by more than three quarters within six months to below US$35.
Prices have since doubled to around US$70 a barrel, but remain less than half their record highs.
“Even though profits are going to decline significantly this year…it’s still a really good year for the oil industry relative to most other industries in Canada,” Crawford said in an interview.
“The future is still very bright for this industry and it will continue to be a source of job creation for Canadians.”
Oil production is expected to increase only 1.8 per cent this year compared with 2008, when output fell.
Citing dismal commodity prices and tightening access to capital, a number of major oilsands players deferred or outright cancelled projects.
Production from conventional oil sources in Canada has been on a long downward trajectory as those fields deplete, Crawford said.
But growth is expected to pick up soon in the oilsands, a resource second only size to Saudi Arabia’s vast oil fields.
“Unconventional sources are huge and we expect development to continue in earnest beginning next year as global demand for oil solidifies and both Canada and the U.S. come out of recession,” Crawford said.
The oil industry’s revenues and costs are both expected to increase by an average of more than 20 per cent annually over the next four years, the forecast said.
The Conference Board forecast excludes the natural gas extraction industry, which has been hit even harder in recent months than its oil-focused counterparts.
The think-tank is set to put out a separate natural gas industry outlook in two weeks.