Don’t weep for the “downstream” part of the oil business, it’s booming
In business lore there is no better advice than “buy low, sell high.”
As markets keep hitting new lows, that’s pretty hard for the average investor these days, but in parts of the oil business, it’s exactly what they’re doing.
The news has been filled with headlines about Canada’s suffering oil industry, which might leave you thinking everyone in the sector is on the verge of going broke.
- TSX and Dow tumble on growth worries
- Oil prices dip to new six year lows
- Irving Oil announces $200M refinery maintenance project
But don’t weep for all of them. In certain sectors, business has never been so good.
Upstream vs. downstream
In oil lingo, although the principle applies to other sectors as well, the industry is divided, for practical purposes, into “upstream” and “downstream” portions.
In parts of southern Saskatchewan oil pumpjacks are thick along the roadside and crude is at six-year lows. That’s the upstream part of the business and it’s hurting.
The upstream part of the business is finding and gathering the resource — in this case, crude oil. Upstream includes the geologists using computer mapping and educated guesses about where oil might be. It includes seismic work where crews look deep underground for likely oil-producing rock formations.
It also includes oil drillers, bitumen miners and the smaller companies that support them with engineers, trucks, heavy equipment for making roads and berms, drilling mud, well testing, storage tanks and pumps. The upstream sector is huge and fragmented.
With oil now at a six-year low, it is this sector that has been devastated, because the dividing line between upstream and downstream is, give or take, crude oil.
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