Whether it’s heating your house or refueling your vehicle, Canadians saw record gas and oil prices last year. Experts say that 2023 will not make much difference.
West Texas Middle, a benchmark crude in the North American Market, is forecast at $80 a barrel in 2023, according to a report released Jan.
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“We are going to see prices soar across the country. It’s a very expensive time,” Andrew Botterill, Canada’s national leader for energy and chemicals at Deloitte, told Global News.
“We expect oil prices to be relatively high this year. And to be honest, natural gas is a really similar story,” Botterill said.
“Unfortunately, as consumers, heating our homes and refilling our tanks is probably going to be very expensive.”
According to Botterill, while rising costs have been predicted across the country, residents in provinces like Alberta and Saskatchewan may notice slightly lower prices due to the proximity of multiple manufacturing facilities.
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Oil prices have been on the rise for a few years. According to a report by Deloitte, in 2021, oil prices will increase by 3.4% year-on-year. In 2022, there was a 6.7 percent increase.
According to Botterill, for more than two years during the period COVID-19 epidemic, the demand for the oil and gas industry decreased.
“That means a lot of oil companies haven’t invested and haven’t put money into new drilling opportunities and brought new production online,” he said.
With COVID restrictions lifted and life returning to a certain degree of normalcy, demand has increased to pre-pandemic levels, or even higher, Botterill said.
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“We are seeing most of the world come out of the COVID pandemic and demand is picking up,” he added.
Combined with Ukraine According to Botterill, the conflict has no end, prices are predicted to remain high.
“(It did) get a lot of episodes released from Russiaboth natural gas and oil, and essentially neutralize them or remove them from the market,” he said.
According to a report by Deloitte, European countries, in coordination with the G7 and Australia, imposed a price ceiling of $60 a barrel on Russian seaborne crude, adding to the price volatility.
Russia, the world’s second-largest oil exporter, has announced that it will not sell to countries that have accepted the cap.
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Werner Antweiler, an economics professor at the University of British Columbia’s Sauder School of Business, expects sanctions against Russia to remain in place until 2023 and thinks supply will be affected “significantly” “.
With countries moving away from Russian oil, Antweiler expects to see an “interesting market shift”.
“That reshuffle means a lot of countries are scrambling to get supplies from suppliers that are seen as safer and more reliable,” Antweiler told Global News.
Prices remain ‘unstable’
“The ongoing rerouting will likely have an impact on pricing,” Antweiler said.
Prices “will go up” and remain “unstable,” he added.
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“There are many things that can happen on the global political stage, from tensions in North Korea to tensions in the South China Strait. Taiwan,” Antweiler said.
“All of these things are conceivable, but of course, we don’t know if they will happen and so what we need to be prepared for is that we live in a volatile world. We need to think and anticipate that there will be significant disruptions to the energy supply due to this uncertainty that we live in in the global world.”
According to Botterill, China’s reopening of its economy following the easing of COVID-19 restrictions could have a “significant” impact on energy demand in 2023.
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“As we see China start to open up their economy, will we see another wave of demand start to shift more investment or shift volume in different directions? I think we can,” he said.
“That would certainly create a whole new set of supply and demand crises.”
It’s a “really similar story,” said Botterill of the natural gas price hike.
In Canada, natural gas production has grown steadily since the end of 2020, as reported by Deloitte.
“But higher prices in 2022 have not produced the spike in supply one might expect,” the report states.
Currently, the lack of momentum in gas drilling and related production reflects uncertainty about future pricing, it added.
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“Inflationary pressures” on household heating costs are also likely to continue as a substantial increase in supply seems unlikely.
With continued geopolitical uncertainty, the first quarter of 2023 is likely to be less volatile than previous quarters, but with fears of a cold winter are also present, the report said. coming nearly”.
Like other commodities, diesel is also forecast to have a high price in 2023.
“Diesel pricing is strategic,” said Dan McTeague, president of Canada for Affordable Energy.
“Fuel is the global driver, and it will go higher,” he said.
Speaking on Show green on Sunday, McTeague predicted this year’s diesel prices would mimic 2022.
“We’ll watch a replay,” he said.
“I think we’re looking at $2.75 a liter this summer for diesel.”
According to McTeague, a big reason for these expensive prices is the very high demand.
“After COVID, economies will recover. We use diesel for everything from heating to fertilizer to jet fuel,” he said.
There’s ‘little’ Canada can do
Jean-Thomas Bernard, a professor of economics at the University of Ottawa, does not expect oil or gas prices to fall much in 2023.
“Oil is a commodity that is traded around the world. It is the most traded commodity,” he told Global News.
With fuel prices determined on a global scale, Canada has “very little control” over how high prices can go, said Mr. Bernard.
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However, demand for oil is expected to decline in the future as Canada aims to help tackle climate change and cut fossil fuel use, Mr. Bernard said.
According to Botterill, while many thought Canada could make more of an energy transition, companies made the decision to “store cash, strengthen their balance sheets and make sure they’re strong.” financial” to prepare for potential fluctuations.
“We shouldn’t expect companies to go out and dramatically increase their budgets. I think they’re investing in things like new technology. They want to switch to lower carbon technologies. They want to help capture and sequester carbon,” he said.