The Energy and Chemical Lead at Deloitte said a decision by OPEC and Russia to reduce oil output could see higher prices for oil filter through the entire Canadian economy.
Deloitte Partner Andrew Botterill said when they were calculating their oil price outlook they were looking at stable prices.
“As we were wrapping up our forecast last week, we noted some softening in the market,” explained Botterill. “We were looking at $75 going forward, and getting softer into the future.”
Botterill added OPEC noticed the same thing, and met on the weekend to address the issue.
“And then the big surprise was the unexpected move by OPEC on Sunday,” he continued. “They issued quite significant cuts to volumes, almost 1.5 million barrels a day, and what we’ve seen is the market really picked up in the last couple of days.”
Botterill said we may be paying more than expected for fuel this summer as the production cuts work their way through the system.
“One of the big things that does affect inflation is the price of energy, and what it takes for us to move our goods, especially here in Canada,” Botterill added. “So this move and the increase in prices potentially into the end of this year could create that same pressure on inflation and consumer’s pockets.”
Botterill said the higher prices should result in strong cash flows for oil producers, allowing them to invest.
The price forecast for natural gas shows consumers are getting a bit of a break.
Botterill said their winter forecast was suggesting higher prices for natural gas, but the weather changed that.
“What ultimately happened is we had a really soft winter,” said Botterill. “Relatively warm across most of the United States, and the demand in North America was lower. The demand in Europe ended up being relatively low, as well, so they’ve kind of made it through this energy crisis a little bit unscathed.”
Botterill pointed out it doesn’t take much to change the direction of energy prices.
“The supply and demand balance is pretty narrow, and all it takes is a cold winter or a warm winter to really change some of the calculus,” he added.
