Everybody has heard the old saying: Be careful what you want. You might get it. However, should such misfortune befall you, there are other “ways to live by.” For example, when given lemons, make lemonade; when chased by gators, make gatorade. In other words, almost all issues can be looked at from two sides. When the economy is in trouble, it pays to alter one’s perspective and search out the positives. These are all clichés, but there really are (almost always) opportunities amidst “outrageous fortune.”

In the first half of this year, everybody was having a problem with high gasoline prices. Filling up the family’s auto fleet was leaving nothing over to spend in other areas. This problem has cleared up with the two-third’s drop in the international price of oil. If you have good prospects of continuing employment, then going to your local service station now can bring a smile to your face.

But there has been another consequence of falling oil prices that is about to hurt the economies of energy producing regions. For example, major investors in Alberta’s oilsands are postponing and shelving their mid-range spending plans.

Oil prices have dropped because the world economy is slowing down, supply levels are relatively high and speculators have gone home to count their winnings. But the oil companies are talking about cutting back major investment spending on new projects, because of the drop in their returns and tighter financial markets.

What do the Oil Companies Want? You Can’t have Everything

Until recently, most of the talk from the oil patch was about skilled labour shortages, material bottlenecks and massive cost overruns. Those conditions are set to change. To all appearances, the oil companies are about to get what they have wanted for a couple of years, better component availability and lower charges. Did they expect this to occur without a weakening in the economy? What more do they want, sky high prices as well? You can’t have everything.

The price of oil will climb back up in a year or two. The emerging nation effect makes this a virtual certainty. There is perhaps a narrow window of opportunity ahead during which it will be possible to get bargain construction costs. As for the financing, there are a number of oil companies that made very substantial sums of money during the good times.

For these reasons, and upon further reflection, there may well be a re-thinking about putting off major energy sector expansion plans. The most far-seeing managers and/or those who are most comfortable with risk, backed by deep pockets, may decide to forge ahead with their projects despite the apparent adverse present circumstances.

Alex Carrick

Find Canadian construction-related economic articles in Canadian Construction Market News and in the Economic Outlook section of Daily Commercial News.

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