A glut in oil production has reduced the incentive to exploit Canadian oil fields, resulting in poor industry performance since 2012.
New York, NY (PRWEB) February 13, 2015
The Mining, Oil and Gas Machinery Wholesaling industry has had a mixed performance over the past five years. As the global economy returned to growth in the aftermath of the recession, demand for Canadian minerals, oil and gas expanded as well, boosting demand for mining, oil and gas machinery. Industry revenue grew particularly strongly in 2010 and 2011 as a result of the rapid development of Canada's unconventional oil and natural gas deposits.
According to the US Energy Information Administration, Canada possesses the third-largest proven oil reserves in the world and also has substantial deposits of shale gas. According to IBISWorld Industry Analyst Zachary Harris, “While these deposits were previously seen as too expensive to exploit economically, high energy prices encouraged a flood of investment into these fields in the first half of the four-year period to 2014. Given the substantial machinery and equipment requirements to exploit these unconventional fields, industry sales expanded very strongly in 2010 and 2011.” A subsequent glut in oil production, however, has reduced the incentives to exploit these fields, resulting in poor industry performance since 2012. More importantly, over the second half of 2014, following an utter collapse in oil prices, demand for industry products has plummeted. As a result, industry revenue is forecast to decline sharply during 2015.
Industry revenue is anticipated to return to growth over the five years to 2020, however. While investment in gas field development has slowed recently due to the supply glut, improvements in transport infrastructure are expected to alleviate this discrepancy between supply and demand, boosting natural gas prices. Oil prices are forecast to rise as global demand recovers and as current underinvestment in fields causes production to fall in upcoming years. However, oil prices are highly volatile by nature. “Rising prices will incentivize oil and gas companies to reinvest in production, increasing demand for industry products,” says Harris. “Additionally, global economic growth is forecast to increase demand for Canadian copper, zinc, nickel and other minerals, raising domestic demand for mining machinery and equipment.” As a result, IBISWorld expects industry revenue to again increase steadily over the five years to 2020.
For more information, visit IBISWorld’s Mining, Oil and Gas Machinery Wholesaling in Canada industry report page.
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IBISWorld industry Report Key Topics
This industry comprises establishments primarily engaged in wholesaling new and used mining and oil and gas well equipment and machinery. This industry does not include wholesalers of pumps, oil refining equipment or pipeline equipment, which are included in the Industrial Machinery and Equipment Wholesaling industry (IBISWorld report 41723CA).
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Globalization & Trade
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