Higher oil prices good for economy of Sask. cities, but concerns over how long it will last

There’s some optimism surrounding the energy industry, which could be good news for some Saskatchewan cities.

While the price of oil has seen some dips recently, it reached a high Wednesday that hadn’t been seen since 2014: Crude oil hit a price of $87.51 a barrel.

With the oil and gas sector being one of Estevan’s biggest economic drivers, Mayor Roy Ludwig said this is good news.

“Any time oil goes up like that where people can actually make a fair dollar, it means more employment and it’s a benefit to the City of Estevan,” Ludwig said. “Personally I’m a bit surprised, but on the other hand, (the price) was so low for so long that producers stopped looking for new oil and stopped drilling.

“We have probably a few years to catch up with the demand now.”

Ludwig said times have been tough recently when the price of oil was low.

“Since 2013 we’ve been hurting as a community on the oil side. There hasn’t been a lot of employment and everything that comes with the price of oil,” Ludwig said. “It’s nice to see things starting to turn around.”

Oil’s price is also good news for Weyburn, but Chamber of Commerce CEO Larry Heggs doesn’t believe it’s going to trigger a boom like before.

“There’s a lot of technology out there that is getting more oil from the well itself as opposed to having to drill more wells. There are also concerns over investment that way. It takes lots of dollars to drill those wells so (companies) have to catch up financially first and then there will be some initiative,” Heggs said.

“That said, the higher prices today will certainly help oil companies and put them in a much better position for their financial efforts as we try to transition to some sort of a lower-carbon economy. There’s a lot of catch-up to do in the oilfield sector.”

Heggs said you could see the effect of higher oil prices last summer, with strong housing and new people moving to the community.

With the oil industry affecting the economy on the national level, Heggs doesn’t believe people will see a big change in demand unless there’s a change from the federal government.

“Who would want to invest in an economy that your federal government doesn’t support?” Heggs said.

Ray Frehlick is the president of Prairie Mud Service, a company that supplies supervision and drilling fluid products for oil, gas, and mineral mining.

He said the rise in the price of oil is positive but he has concerns over how long it will stay high. He said OPEC is cutting back its supplies and the pandemic is causing people to use fewer energy products, with flights being cancelled or boats being docked.

“The whole economy is kind of on lockdown so that affects energy consumption,” Frehlick said. “It’s not only a severe winter in Canada, it’s quite a severe winter in a lot of parts of the world. That has increased diesel and propane and energy consumption in general.”

He said it affects the company’s business because higher drilling activity levels mean more business. But he notes a lot of oil companies have been struggling since 2014.

“There’s a lot of companies that were struggling severely,” Frehlick said. “It certainly helps that companies are getting back on their feet but think about investors that have shares in oil companies that would like to make some money; that’s why they invest it.

“There’s certainly some optimism that energy companies are going to spend some money upgrading or enhancing their production through work orders.”