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ENERGY: Oil patch cautious despite high oil and gas prices
        (AlbertaIndex, August 21, Thursday) --- Oil and gas prices may have roughly doubled from last year’s levels but the mood in Canada’s oil patch remains sober and cautious.

        Despite numerous forecasts for oil to reach US$200 a barrel or more, the industry and its backers are worried if current prices are sustainable over the long run.

A US recession and the lingering credit squeeze could hit oil demand and drive energy prices down just as quickly. Furthermore, in an election year, US politicians and environmentalists appear to be campaigning to reduce the use of Alberta’s “dirty” oil sands.

The industry has to worry about the direction of federal and provincial environmental policies as more Canadians want to reduce the country’s greenhouse gas emissions. Again, the oil sands have emerged as a favourite target.

The industry also remains unsure how to respond to Alberta’s new royalty regime which is aimed at extracting more revenue from the industry.

The industry is wary about the Federal government’s plan to phase out the tax-exempt status of energy trusts in 2011. Many energy trusts fought a bitter battle against Ottawa, which has resolutely refused to budge from its unpopular policy to impose tax.

All this comes on top of soaring investment costs for new projects. Material and labour costs have gone up dramatically in recent years, adding to the rising cost of business.

So, far from celebrating Canada as the world’s new “energy superpower”, caution and scepticism are the order of the day in the oil capital of Calgary.

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