I'm a commuter, doing about 100 km round-trip each workday. And that means that gasoline is one of our family's big expense items. So, naturally, I'm not thrilled with various predictions that the price of oil is going to go higher and remain high. Oil prices were somewhere around $37 (US) this week and could go to $40.
So, as I said in a piece I did for CTV [see the link to my story under the Video section on the right], that means more pain for consumers at the pump.
But it also means continuing strong oil company profits. Imperial Oil's first quarter profit, which it announced Wednesday, was a near-record profit. Shell's was a record for the quarter. Next week, Petro-Canada and Suncor will likely post very healthy numbers.
All of those firms are Canadian companies, of course, and their profits mean good things for Canada's economy. For one thing, the tax revenue in oil-rich parts of the country, like Alberta and the Atlantic provinces, jumps when these firms do well. They also tend to spend more on new capital projects and buy other goods and services. That helps put more money back into the economy and create new jobs.
Canada is a net exporter of oil -- that is: we produce more than we consume -- sending most of the extra stuff to the U.S. This helps bring new wealth into the country.
All these record profits have made it a very good year to be an investor in the oil and gas sector -- the resource fund at Altamira, for example, is up 58 per cent since January 1 this year. And, even though they may not know it, most Canadians have their own money tied up in this sector. Certainly, the Canada Pension Plan, which most Canadians contribute to, would have invested in this sector (just as they invest in most sectors of the economy.) Most company pension plans, too, would likely have money in oil and gas.
Because the sector is such a big part of the Canadian economy, many of these firms are part of the benchmark Toronto Stock Exchange 300 and that means that many mutual funds in Canada that mimic the index or invest in Canada's biggest corporations would own oil and gas shares. In fact, hundreds of mutual funds in Canada are exposed to the sector.
Which means, as I hoped I explained in that CTV piece, the high pump prices may be a case, for Canadians at least, of money coming out of one pocket and going into another.