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2008 Canadian Energy Overview - Energy Interview

Canadian Energy Overview 2008 - An Energy Market Assessment - May 2009

John McCarthy, Business Unit Leader for Strategy and Analysis, talks about the Canadian Energy Overview 2008 report and what it means for Canadians.

Looking back on 2008 it was quite the year for energy markets. What were some of the biggest impacts of the year on Canadian consumers?

2008 was a very interesting year and I think you could almost divide it into two sections. The first have of the year was sort of characterized by a very strong ramp up in oil prices and energy prices and in fact we got as high as $147 in July which was a record. The first half of the year was dominated by a lot of policy being announced with regard to climate change and energy efficiency. Of course you had a very strong bullish economic outlook with respect to the oil and gas sector itself. However, in July things turned around quite abruptly. In August we saw a series of credit and financial crises and an economic slowdown globally brought those prices that we experienced in the first half of the year back into the $40s range. That too had quite a significant effect on Canadian consumers as far as their energy consumption goes mostly from the side of trying to save dollars.

So overall, did Canadians cut back on their energy consumption in 2008?

Actually over the past five years Canadian consumption has been pretty stable and in fact it has gone up a little. We saw from the initial estimates that there was very small growth between 2007 and 2008. Some of the growth was in the transportation sector which grew by a very small margin. Compared to previous consumption, we're seeing that Canadians are increasing their energy consumption but there is perhaps some slowing that we've seen evidence of in the last year.

The report talks about some of the green or environmental initiatives that were gaining interest in Canada. How did these initiatives impact the Canadian energy sector?

As I mentioned earlier there were a number of initiatives that were brought on in the first part of the year and the policies of that type tend to take time to take hold. So we haven't really seen anything identifiable as far as reduction in consumption of energy. Although there's a couple of policies that are starting to have an effect on energy trends perhaps as well as the economic situation affecting it. The two things that we indicted was an increase in the number of passenger cars being purchased as opposed to trucks and also an increase for the first time in more multi-family homes being constructed as opposed to single detached homes. Those were two indicators that perhaps energy consumption patterns by Canadians are changing.

Some of the major oil sands projects were postponed or cancelled in 2008. What was the impact of this on the Canadian energy sector?

When you have low energy prices in the second half of the year it had a significant impact on the oil sands developments particularly those in the future. Those that were early in the planning stages have been cancelled or postponed. I think that people are just being very careful with respect to those long term investments and trying to make sure that they have a better understanding of what the long term energy prices are going to be for those projects. We're also seeing a fairly significant impact on these projects by the increase costs within the oil sands sector in 2008. That also affected a lot of decisions by companies to either postpone or defer these projects.

You mentioned the volatility in energy prices earlier, what was the impact of that on the Canadian economy?

Interestingly because of the high prices in the first half of the year Canadian energy prices were extremely high our export revenue went to a record year. We went to $133 billion of export revenue from energy products and energy. That's the highest amount ever and in fact it represents about 28% of all the exports from Canada. So it is a very significant part of the Canadian economy. On the down side with respect to the volatility, the high prices are going to make it difficult for Canadian consumers and Canadian energy intensive industries in order to make their organizations profitable. And we're also seeing with a high amount of volatility like that companies and industries tend to defer a lot of decisions for investments making sure they want to wait until they have a more stable environment ahead of them and something that they can be a little more comfortable with in making those long term plans and commitments.

Looking ahead, what are you seeing in terms of the type of year 2009 might be?

Well 2009 will no doubt be interesting as well. We've certainly seen quite a significant drop in energy prices from what we've seen in the past and so we would anticipate that with such a drop the export revenues Canada would receive would be down. We're also seeing that in the natural gas world natural gas drilling is off quite a bit this year, again reflecting the low energy prices we're experiencing this year for natural gas. So I think we're going to see a continued slow down in the economic world and continuing volatility but lower energy prices in 2009. We'll likely see that there will be a drop in natural gas production and prices will be fairly reasonable in the natural gas world and perhaps lower in oil and than we've certainly seen in 2008.

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Date Modified:

2011-10-28