The En-Pro Blog

The Globe and Mail reports today that the recession is over, but the recovery will be painful. What we know in the oil business is that the recession has suppressed demand and increased inventories, eroding their once beefy diesel and gasoline margins to baloney thin profits in 2009. They will not be able to repeat the stellar results of 2008 disappointing their anxious shareholders. The current economic climate indicates profit levels won’t begin to rebound until 2010 at the earliest. What are these oil executives going to do? They will continue to tightly manage their costs by eliminating all unnecessary expenses, cancel major development projects, and look for strategies to maximize return on investments during this downturn.

The recessionary cracks in the foundation of Big Oil have taken their toll with three major announcements/rumors made last week that could have major impacts on future supply and fuel pricing. The first salvo of bad news was Shell’s announcement that they will be conducting a strategic review of their Montreal refinery that may affect Eastern Canadian fuel users. It was built in 1933 and processes 130,000 barrels/day of crude.

With the current and future prospects for poor refining margins, it doesn’t make sense to continue investing in a 76 year old asset. Over the next few months they will decide whether to sell it, convert it into a fuel loading terminal or close it.

In another serious foundation crack, we learned through an industry source that Esso is currently reviewing their Canadian cardlock operations and considering closing down the company owned network.

So what do these stunning possibilities in the Canadian oil industry mean for Canadian business? And what will it mean for Canadian truckers traveling in the U.S. with the shocking announcement that Flying J is merging with Pilot?

Find out in this week’s Energy Report. Sign up sending your email to: info@en-pro.com.

By: John Voros - Petroleum Analyst