CALGARY - A business think-tank sees rosier times ahead for Canadian oil producers, who are expected to reap $8.4-billion in profits this year as the world economy recovers from the recession and energy demand picks up.
"With the global recession giving way to economic recovery, demand for crude is expected to resume a long-term upward trend," the Conference Board of Canada said in its summer industrial outlook, released Thursday.
Global oil consumption is nearly back where it was before the financial meltdown, which last year led to a 90 per cent drop in industry profits to $1.7 billion.
Prices have almost doubled from the lows they hit in 2009, with crude for October delivery settling just above US$75 per barrel Thursday on the New York Mercantile Exchange.
The Conference Board is calling for a 2010 average crude price of US$79.50 — still well below the 2008 peak of US$147. It predicts price increases will be limited by uncertainty over the recovery and high inventories.
But the group is expecting crude prices to strengthen longer-term, hitting US$117 per barrel in 2014.
"Revenue growth will be sufficiently strong to push profits to $21.3 billion in 2014," the report added.
Meanwhile, the board said Canada's oil producers should pull 4.1 per cent more crude from the ground this year with improvements on the conventional side, the group said.
Most future growth is expected to come from higher oilsands production.
"The exact timing of individual projects remains uncertain; however, with oil prices remaining elevated and several projects already announced, there should be no shortage of new capacity coming online over the forecast," the report said.
Last year, costs in the industry fell 20 per cent to $67.5 billion, with the biggest drop coming from material costs. The fact that many producers hung on to their workers stopped costs from plummeting further.
"Costs will bounce back this year. With so many projects on the horizon, oil companies will add 3,400 more jobs to their payrolls," the report said.
Wage growth will slow, but it will still hover above the national average at 3.9 per cent.
"Combined, this will drive labour costs up 10.3 per cent this year," the report said.