Slumping oil prices are hurting oil producers in Petrolia and Central Lambton, but low prices won’t be enough to stop the pump jacks from pumping.
In the last few months, oil prices have plummeted from over $100 a barrel to $46 at press time.
Big oil companies, such as Suncor Energy, have already announced cutbacks and layoffs in Alberta’s oil patch. The province of Alberta is scrambling to cut costs as oil revenue crashes. The federal government has also delayed its budget to get a better grip on how the falling prices will affect its revenue projections.
In Oil Springs, where the first oil in Canada was pumped from the ground over 150 years ago, a handful of small producers continue their work even as analyst predict oil at $30 a barrel before the slump is over.
“I’ve been asked if I’m losing money; yes, I am.” ” says the largest local producer Charlie Fairbank of Fairbank Oil.
But wild swings in oil prices aren’t new to local producers. This sharp drop reminds Fairbank of the wild ride producers went on in 1986.
“In ’86, the bottom dropped out and we went down to $10 a barrel,” he says. The earliest oilmen also endured fluctuating markets. After the first gusher, Fairbank’s relatives saw prices drop from $10 a barrel to 10 cents.
“My father pumped oil at two and three dollars in the 1940s,” he says. “I recall when the price went from $3.84 to $4.28 a barrel, we thought we’ve hit the big time.
“We’ve seen some swings and this is a major swing.”
Fairbank says no one anticipated such a large drop. “I don’t expect the price of oil to sit at $100 a barrel and when there was talk about a drop you thing $10 or $20. There was no way to know how far it would go.”
Fairbank says if anyone did know, they would have arranged contracts to sell their oil at the higher prices.
For now, the smaller producers have to ride out the low prices. “There is no guarantee prices will go back up, but they probably will,” says Fairbank adding until then there is “absolutely nothing we can do except economize as best we can and keep our fields in shape.”
Shutting down, Fairbank says, would lead to the deterioration of equipment and make it too costly to start up again when the prices rise.
And he says, he feels a moral obligation to continue producing in the historic fields. “Oil Springs is a National Heritage Site…and deserves to be recognized as a UNESCO World Heritage Site…therefore I cannot shutdown under any circumstances and ignore the incredible contribution this part of Canada has made to the world.
“It would be a travesty to shutdown because of money.”
Falling oil prices could also have a direct on Petrolia Discovery historic site. It derives some of its revenue to operate the site from selling oil. Last year, nearly $30,000 in revenue came from oil sales – far less than normal because of problems with the wells. Under current pricing, that would shrink to about $15,000.
While the slumping prices are problematic, so far people who work in the petrochemical sector in the area aren’t feeling the pinch.
Ray Curran of the Sarnia Construction Association says the number of projects underway in the industry is encouraging and many of the associations’ members are working at home instead of traveling to the oil patch.
And he says lower prices at the pumps may actually help employment at the local refineries. “Hopefully, the refining end of the business we’ll be producing more gasoline if more people are driving because of lower gas prices.”