3 Reasons to Be Optimistic About Canada’s Energy Sector

The mood was very upbeat at an energy conference last week. Here’s why.

| More on:
The Motley Fool
You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn more

As the large crowd gathered at the Sheraton Hotel in downtown Toronto late last week, there was a renewed sense of optimism. The group was there for an energy conference run by the Canadian Association of Petroleum Producers (CAPP) and Bank of Nova Scotia. Tellingly, attendance was double the amount from the same conference in December 2012.

There are three reasons in particular that the mood was brighter than it had been in years.

1. Easing of the bottlenecks

Over the last couple of years, the big story has been a lack of transportation infrastructure for Alberta’s oil, forcing energy companies to accept discounted prices for their product. TransCanada’s (TSX: TRP)(NYSE: TRP) Keystone XL pipeline has not been approved and faces stiff opposition from environmentalists.

Nowadays, these transportation bottlenecks are easing significantly, as new pipelines and crude-by-rail capacity comes on stream. In fact there is a growing belief that the industry doesn’t even need Keystone anymore. This is quite a change from two years ago.

2. Environmental progress

Over the past few years, Canadian energy companies have put a lot more effort into environmentally sustainable activities, and there is a growing feeling that this will help the industry avoid unfavourable regulation. For example, Imperial Oil’s (TSX: IMO)(NYSE: IMO) Kearl oil sands operation has about the same life-cycle greenhouse gas emissions as many crude oils refined in the United States.

In fact, there is growing confidence that if President Obama approves the Keystone XL pipeline, then environmentalists will shift their focus to other polluting industries, such as coal.

3. Supply issues elsewhere

While North America seems to have all the energy production it needs, the same cannot be said in many other regions. Events like the crisis in Ukraine, chaos in Venezuela, or continued issues in countries like Libya, continually remind us that North America is the world’s most stable energy-producing region.

For that very reason, world energy prices have held very firm. And while no one cheers for chaos, it is reassuring for North American energy producers that their stable environment is such an advantage. Over the very long term, especially if the United States eases energy export restrictions, world instability should continue to provide price support for North American producers.

Foolish bottom line

The Canadian energy sector has given us yet another reminder that the best time to buy is when others are fearful. So today may not provide as many great opportunities as there were two years ago. But with President Obama’s decision on Keystone coming up later this year, the party may keep going.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Benjamin Sinclair holds no position in any of the stocks mentioned in this article.

More on Investing

Profit dial turned up to maximum
Tech Stocks

$1,000 Invested in Constellation Software Stock Would Be Worth This Much Today

Constellation Software (TSX:CSU) is trading above $2,000 today. Why this stock is so expensive, and is it worth buying?

Read more »

Dividend Stocks

Passive Income: 3 Top Canadian Stocks to Buy for Monthly Dividends

Companies such as Pembina Pipeline and Killam Apartment REIT pay investors monthly dividends, making them top bets for income-seeking investors.

Read more »

Shopping card with boxes labelled REITs, ETFs, Bonds, Stocks
Stocks for Beginners

TFSA Investors: Top TSX Stocks to Buy With $6,000

Here are two safe, dividend-paying TSX stocks for your long-term portfolio.

Read more »

Gold medal

3 Growth Stocks That Could Be Huge Winners in the Next Decade and Beyond

Are you looking for growth stocks that could be huge winners in the next decade? Here are three top picks!

Read more »

Retirees sip their morning coffee outside.

Retirees: How to Make Over $95/Week in Passive Income TAX FREE!

Canadian retirees who are hungry for passive income should look to snag stocks like Sienna Senior Living Inc. (TSX:SIA) in…

Read more »

Man holding magnifying glass over a document

Where to Invest $500 in the TSX Right Now

Given the massive correction, long-term investors can start buying stocks like Shopify and goeasy to outpace the broader markets by…

Read more »

Aircraft wing plane

Air Canada Stock Is a Fantastic Deal Right Now

Air Canada (TSX:AC) is a great stock to own, as market fear turns into hope amid falling recession fears.

Read more »

Pixelated acronym REIT made from cubes, mosaic pattern

Beginner Investors: Get Passive Income by Investing in REITs!

You can get passive income by investing in REITs like Northwest Healthcare Properties REIT (TSX:NWH.UN).

Read more »