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Toronto Sun: Royal Dutch Shell dropped a bomb

TorontoSun.com

Gas prices down, but marginally

By LINDA LEATHERDALE, TORONTO SUN 
Today, cash-strapped motorists get a 3 cents break from gouging prices at the gas pumps, with oil prices off $9 a barrel so far this week.

And what does OPEC get? To walk away with a record $1.251 trillion US this year in earnings from oil exports, making the cartel richer than the world’s Big Four oil giants, with Exxon Mobil, Chevron, ConocoPhillips and Royal Dutch Shell raking in combined record profits of $99 billion last year.

Net oil export earnings for the Organization of Petroleum Exporting Countries (OPEC) is expected to jump 86% this year from $671 billion in 2007 — then zoom another 6% in 2009 to $1.322 trillion, predicts the Energy Information Administration (EIA), the top energy forecasting agency in the U.S.

Meanwhile, with oil prices falling another $5.33 yesterday to $136.04 a barrel, well below a record high of $146 last week — we awake today to pay $1.315 a litre for self-serve, regular unleaded, down 2.8 cents in the GTA. Ottawa’s price also drops 2.8 cents to $1.306, and in Montreal they’ll be paying $1.436, down 3 cents. 

 

Diesel prices in the GTA get a bigger break, down 3.8 cents to $1.388.

But warning: These prices won’t last, if a forecast by the EIA is right. Yesterday, the agency warned that oil supplies from non-OPEC countries will be far smaller this year than previously expected. And that will push U.S. pump prices to a new record high of $4.25 a gallon, even though fewer and fewer cash-strapped families can afford to drive, with demand falling off.

The EIA says pump prices won’t fall below $4 a gallon until October 2009, with oil prices averaging $127 a barrel this year, followed by $133 in 2009.

“Faster declines in older fields and delays in expansion projects have limited supply growth,” said the EIA.

In Japan yesterday, leaders of the Group of Eight economic powers warned the world economy is now facing uncertainty, thanks to skyrocketi ng energy prices.

“We express our strong concern about elevated commodity prices, especially of oil and food, since they pose a serious challenge to stable growth worldwide, have serious implications for the most vulnerable and increase global inflationary pressure,” said a G8 communique.

BOMB DROPPED

But while G-8 leaders urged petroleum suppliers to boost production and refining and to increase investment in oil exploration and output, Royal Dutch Shell dropped a bomb.

The oil giant, which raked in $27.6 billion last year, cancelled plans to build a multi-billion-dollar refinery near Sarnia, where it was to process crude from its expanding Alberta oil sands operations and process 150,000 to 200,000 barrels a day.

To blame were surging construction costs and, believe it or not, poor market conditions with refinery profits under squeeze despite record high gasoline prices at the retail level.

“There’s not a lot of incentive to get these refineries up and operating, even though there’s pretty strong demand for gasoline and lower gasoline prices,” said Chris Feltin, an analyst with Tristone Capital.

And more bad news, especially for hard-hit Ontario. Two economists yesterday said the loonie is under-valued, when stacked against rising oil prices.

CIBC economist Avery Shenfeld predicts the Canadian dollar will be trading slightly above par by the end of the year, while Dale Orr, a senior economist with Global Insight Canada, says the dollar will trade at $1.03 US.

Yesterday, the Canadian dollar closed at 98.13 cents US, while the Toronto Stock Exchange gained almost another 100 points after three days of losses. 

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