OTTAWA — The Lord may not yet have answered the prayers of a thousand Alberta bumper stickers but a rising oil price suggests he is listening at least.
The plea for a divinely-inspired oil boom, in exchange for the assurance that this time it wouldn’t be “pissed away,” is bearing fruit. There has been a nine-month run-up in the oil price, from around US$50 a barrel of West Texas Intermediate to around US$68 — a surge that, if sustained, will create stronger revenues and $20 billion of cash looking for a home this year.
In times past, that might spark an investment boom, as the money was recycled into new projects. But such is the disillusionment with Canada’s competitive position, many companies have been finding other uses for the spare cash.
Rich Kruger is chief executive officer of Imperial Oil, Canada’s oldest and second-largest integrated oil company. He said Imperial resolved the conundrum of what to do with its relative bonanza by giving $400 million back to shareholders, in the form of share buy-backs and enhanced dividends, lifting the share price from a five-year low.
But in a lengthy interview about the parlous state of the oil and gas business in Canada, the Minnesotan explained why the appetite to plow profits back into the oil patch is so weak.
To be clear, there is no sense that happy days are here again. While WTI has risen substantially, the price heavy oil producers receive for West Canadian Select has remained stable at around US$35-40. Kruger said the industry in Canada has not received the same benefits as other parts of the world from the rise in light oil prices because of a range of bad public policy choices.