Yellowknife (July 19/04) - Prices of oil and gas are in for a long ride on the high side of expected levels, says a senior analyst with one of Western Canada's leading oil and gas investment firms.

Higher than expected growth in Asian countries, especially China, is fuelling sustained higher prices for crude, says Calgary's Wilf Gobert, vice-chairman for the oil and natural gas investment firm Peters and Co. Ltd.

That influence will be felt in the NWT, where consumers will soon be paying more for power.

Communities fuelled by diesel throughout the Northwest Territories are going to be the first hit, some as early as this fall.

On the flip side, higher oil and gas prices will result in increased demand for the territories' oil and gas.

There are three Power Corporation stabilization funds set up in the Northwest Territories. One is for Norman Wells. Another is for Yellowknife. A third one is for virtually every other community in the territories.

Two exceptions are Inuvik, which has its own stand-alone system through the Ikhill Gas Field, and Fort Smith, which is self-sufficient through hydro.

Norman Wells forecast

The stabilization fund in Norman Wells is still in the black. But while the Norman Wells stabilization fund is $27,000 to the good, it has a $100,000 deficit trigger.

Projected higher than anticipated oil prices has Stephen Kerr, manager of operations support with Northwest Power Corporation, predicting Norman Wells' $100,000 deficit trigger will be reached by March 2005.

Diesel communities forecast

In the diesel communities, the stabilization fund is sitting at a current deficit of $680,000. The $1 million deficit trigger will be hit as soon as one or two months from now, said Kerr.

"We set our rates two to three years ago based on $28 a barrel for crude. Today it's closer to $40 a barrel," said Kerr.

The $12 difference in the rates for crude roughly translates into 12 cents per litre difference for diesel.

Yellowknife forecast

The Yellowknife stabilization fund is $475,000 in deficit. Once the fund hits a $1 million deficit, the Power Corporation will make applications to the Public Utilities Board to increase rates.

Kerr expects that will happen in Yellowknife within the next eight months.

The Power Corporation does not have enough purchasing power to achieve discount rates through bulk buying.

"Fuel is being loaded on the barges as we speak, and that's when the prices are set. This fuel will be going to these communities and the price is not going to drop significantly over the next three to four weeks," said Kerr.