In spite of low oil prices the oilsands projects continue to pump, even though these companies are often taking a loss on each barrel that they manage to produce. In fact analysts say that these companies don’t really have any other options. Canadian heavy oil fetches even less on the market because this oil is typically heavier and it requires more refining. Energy companies that operate in the oilsands typically sink millions and even billions of dollars into each project, with a project lifespan that can cover decades. According to analyst King “I know it sounds contradictory, but just given the long time span over which these things are supposed to operate, they have to keep them running. They just don’t really have a choice.”
Another consideration with low oil prices that affect oilsands projects is that these operations can be incredibly technical, and stopping operations could cause damage to the area or the equipment. King stated “Our grind back to even something around US$60 a barrel is going to take a number of years. There’s still too much supply in the world.” OPEC has also continued to keep the same output in the hopes that competitors will be squeezed out. In spite of taking a loss on the oil being produced companies who are engaged in oilsands projects really have no alternative, and this may not change any time soon because analysts predict that low oil prices will continue for some time. Citigroup commodities global head Edward Morse is still optimistic though, saying “The oil industry has proved to be remarkable adaptive with pain. The combination of adaptation, waiting it out and a bit of consolidation are the way to go. Markets tend to balance more quickly than you think they’re going to do when you’re in the worst part of the market.”
