Lower oil prices here for awhile: BMO
Don’t expect to see oil prices climb back to the $100 per barrel range anytime soon, says BMO Private Banking’s chief investment strategist.
“Be prepared for oil at lower levels,” said Daniel Theriault. “While I do see a bit of recovery in the price of oil, I’m pretty confident its not going back to the $100 level.” Theriault, who was recently in Saskatoon speaking with private bank clients, foresees oil climbing to the $65 to $75 per barrel by the end of next year or early 2017.
And while it may be painful, the oilpatch in Alberta and Saskatchewan have responded well to the drop in prices by quickly scaling back operations.
“The operators had their playbook ready,” he said. “They hunkered down quickly and knew how they were going to respond to this.”
He said the federal and provincial governments also need to respond to the downturn with sound policies.
The first thing is to recognize you are in a cyclical business and to put money away for a rainy day.
“And you want to create a favourable environment for people to do business in your country and to set up businesses,” he said. “That means sound fiscal policies, a lack of red tape, and a lack of cost around hiring people so that business can be flexible.”
And there needs to be a tax regime that recognizes the need for business development.
“Canadians will build out and put capital into businesses. You’ll see an entrepreneurial spirit lift, and you’ll see foreign capital as well.”
Theriault said Saskatchewan should weather lower oil prices better than Alberta and Newfoundland and Labrador because the economy has more sectors to rely on.
“Saskatchewan has a slight advantage in that the economy is a bit more diversified. You have a very strong agricultural base ... and you’ve got potash as well.”