Energy minister and local MLA Peter Guthrie believes the fundamentals remain solid in the oil market, despite the drop in price experienced over the last week.

The West Texas Intermediate, considered the benchmark for North America, currently sits slightly above $67 a barrel, the lowest crude price since December 2021.  

Market analysts have blamed the drop on the health of the global banking sector in the wake of the recent closures of Silicon Valley Bank and Signature Bank. A four per cent drop in the price of crude on Wednesday alone saw Canadian energy stocks take a tumble.

Guthrie believes it's being generated by a real lack of understanding of where markets are going, but that the demand is there. He points to how China was late in coming out of COVID and its growth in demand is on the rise. 

"There have been question marks around rate increases and inflation," he says. "Some are speculating that they may revert some of the rate increases, and so whenever you have this uncertainty, and you pile on top of the fact that the banks, Credit Suisse and others, are potentially having financial difficulty, this just adds turmoil to the marketplace. Whenever you get that uncertainty, then you get wild swings in the market, but fundamentals are sound."

According to an Alberta government analysis published on Feb. 23, 2023, the West Texas Intermediate (WTI) price of oil averaged US $78.12 a barrel in January 2023, 6.1 per cent lower than it was a year earlier.

The Western Canada Select (WCS), the price obtained for many Alberta producers of oil, averaged US $49.94 a barrel in January 2023, 23.9 per cent lower than it was a year earlier.

Today, it's US$47.10.

In his role as Energy minister, Guthrie has been in constant consultation with other energy officials, both at home and abroad. He has noticed some striking similarities in the discussions.

"You know, the last 2 1/2 years with the pandemic bringing about inflationary pressures and then geopolitical events with Russia's invasion of Ukraine, it's really highlighted the errors of our ways of outsourcing for decades," says Guthrie. "It's shown how one country has weaponized their resources, so through all of these trips there has been a real initiative to reach out to like-minded jurisdictions to try to do business together"

He defines those jurisdictions as ones with sound environmental stewardship, concern for human civil liberties, and strong regulatory and governance structures.

He says several months ago, German Chancellor Olaf Schultz came to Canada first, because of the trust that exists between the nations, looking for light natural gas (LNG). Guthrie says Prime Minister Justin Trudeau turned him away, saying there was not a business case for it.

"One of the things that we were doing by having these trips to meet with companies, institutions as well as other industry players was to say, yes, there is a business case."

"I think the tide is turning," says Guthrie. "I really do feel that the federal government is starting to feel the pinch when you have countries like Germany, Japan, South Korea, and others that are appealing to us for help and support. I think that pressure to help is coming through and actually you could see it with what, I think, was a big impact on British Columbia, and one of the reasons why they moved forward with a new framework to try to expedite LNG off the West Coast."

He also believes ground is being gained in building relationships with the federal government and other provinces.

"We set out rules of engagement, we act professionally, and we have mutual respect. It doesn't mean that we're always going to get what we want, but if we try to look for areas where we can find common ground, it's a good place to start. I feel like we're building those relationships right now."

He says it hasn't been without hiccups.

"I've been stressing the fact that taking Alberta by surprise is not beneficial to that relationship. Things like the just transition or announcing at COP 27 the fact that they're going to change methane regulations. This is not the kind of relationship-building that we would recommend, and that's where some breakdowns can happen.

"That being said, I've had discussions with federal ministers, including Minister (Jonathan) Wilkinson (federal natural resources minister) on Tuesday and I found it very productive, so I'm encouraged."