Are the oil companies earning excess profits?
Given the rising price of crude oil in international markets recently, it is to be expected that Canadian oil producers would benefit. The upstream (exploration and production) part of the industry is reporting good returns compared to those they experienced in 1998 and 1999 when crude oil prices were at historically low levels. A large portion of the profits generated over the past year will be reinvested by producers into exploration and development of additional oil supplies which contributes to the growth of the Canadian economy. For most of the last decade refining margins have been well below sustainable levels. Canadian oil refiners will use their increased returns to help finance the new investment that will be needed over the next few years to meet new fuel specifications and emissions regulations required for environmental purposes. Increased margins have also served as an incentive for industry to invest in new refining capacity.
