What Happens to Currencies
If Oil Goes to $60? - Forex Market
Friday, 03 June 2005 GMT - Source
FXCM
In the currency market, the single
biggest beneficiary of rising oil prices is the Canadian
Dollar. As of January 2004, Canada's total proven crude
oil reserves stood at 178.9 billion barrels trailing
only Saudi Arabia, which holds the most proven crude
oil reserves in the world. However, the vast majority
of Canadian oil inventory is trapped in the sands of
the Alberta province.
Some analysts estimate that the region could contain
as much as 300 Billion barrels – enough crude
to supply US needs for over 40 years. Until recently,
the cost of extraction have been prohibitive, reaching
as high as $15-$20 per barrel because of the need for
massive filtration equipment. However, recent advances
in extraction technology have lowered the price to only
$9 per barrel making the Alberta Oil Sands venture highly
competitive in the present market prices.
If oil reaches $60 per barrel, Canada which is already
the biggest exporter of oil to the United States, will
experience a tremendous boost to its economy. The energy
sector comprises 8% of the Canadian GDP while its indirect
contribution to the Canadian economy is far greater.
Therefore, if oil rises the CAD is likely to closely
follow.
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