Oil and gas capital spending better but far from great
Spending by oil and gas companies in the second quarter was 46.4% higher than during the same period last year
By Rob Roach, ATB Economics 9 September 2021 1 min read
As expected, oil and gas extraction capital spending in Canada has improved since the lows reached last year due to the oil price crash and the onset of the pandemic.
Seasonally adjusted spending by oil and gas companies in the second quarter was 46.4% higher than during the same period last year for an increase of $1.8 billion.
There is still some catching up to do with spending over the first half of the year down by 10.3% ($1.3 billion), but forecasts suggest that the difference will be made up over the second half of the year.
Despite this, the downward slide in oil and gas capital spending that predated the pandemic and price crash remains in play.
Hence, while the rise in capital spending relative to 2020 is good news for the economy, it will not be on par with pre-pandemic levels. As a result, our economy will not receive the same amount of economic boost as it has in the past.
Relatively strong oil and gas prices have enabled the sector to repair some of the financial damage it incurred last year and are creating some short-term investment headwinds.
The long-term outlook for a return to past levels of capital investment is less positive due to transportation challenges and other impediments to expanded production.
Answer to the previous trivia question: The United States, China and Japan accounted for 95% of Alberta’s total international merchandise exports in July.
Today’s trivia question (the first of a special non-partisan federal election series): How many seats are there in the House of Commons?