Consumers in Estevan and area can expect a possible jump at the pumps in the coming days, as the powers that be over the energy market came out of meetings in Vienna, Austria, on Thursday.
OPEC, as expected, moved forward with their intentions of extending oil production cuts to the end of 2018 in an attempt to reduce inventory, and thus raise the price of oil. Their current 9 month deal expires in March, and the new decision now means that the decreased quotas will last the rest of the year. However, they have also signaled that they could back off of the new agreement if the market overheats.
That said, a couple of non-OPEC wildcards could also come into play in the situation. One being Russia, who hasn't proven extremely cooperative with the cuts, and the U.S, who has been ramping up their oil production. Some say that either of these could potentially undermine whatever reductions are attempted by OPEC, which includes many of the major producers in the Middle East, and maintain the market saturation.
The cut extension, according to analysts, may result in a spike in the price of gas at the pump, meaning a bit more coming out of the wallet for Estevan residents. However, according to Ray Frehlick of Prairie Mud Service, southeast Saskatchewan folks may not see a lot of other effects for a while yet.
He noted that the oil market goes by U.S dollars, and Canada's geography results in most trade happening to the south, the States. We also sell our oil cheaper than Brent, and our different grades vary in pricing. We may not see much effect on local economy until the glut is used up on the coastline.
While concerns have been raised about increased output from the U.S and whether that will undermine OPEC's efforts, Frehlick sees it differently.
"I think it's estimated that the U.S might gain 500,000 barrels per day in the next calendar year. It shouldn't affect the overall oil production around the world if the OPEC nations are cutting back 1.8 million barrels a day. It's to get rid of that glut. When OPEC and Russia decided to cut their production by 1.8 million, I don't think anybody knew how much oil was sitting in the waters, on ships that wasn't taken into account in inventory at the time."
"I think we're seeing signs now that we're getting some of that glut that wasn't accounted for in the cutbacks being utilized and taken out of inventory. I think, going down the road, it's going to help immensely," he added.
As for filling your tank, it most likely will cost more in 2018.
"I think we'll see gas prices rise. Not extreme, but moderately, as the price of oil goes up. In Canada, and in particular western Canada, we don't have enough refining capacity so we do import gas."
He also expressed that, unless pipelines are developed to get more western oil out, the economy could stay relative sluggish.
That said, whatever shakes down from the OPEC agreement for the Estevan area and it's oil industry could end up being a positive thing, according to Frehlick.
"If we see $70 or $65 oil here, we're gonna see increased activity in oil exploration and development that we haven't seen for a couple three years because of low oil pricing. When it comes to southeast Saskatchewan, and Saskatchewan as a whole, we'll just be plugging along slowly. If the economics work, we'll see some increased activity, which should be good for everybody in this province," he concluded.