Zach LarkinsGAS SHORTAGE
A couple of weeks ago a small fire broke out at an Imperial Oil refinery. This minor fire sent shock waves throughout Ontario. Gas stations started rationing their supplies, in one case limiting customers to 75 L per fill. That's just 19.73 US gal. for those keeping score. Some stations were forced to close as they had no gas at all. The situation was made worse by winter weather, a rail strike, and minor disruptions at a refinery in Quebec In accordance with this tragedy, the remaining suppliers upped their prices to $1.0260 per L, or $3.90 US per gal. The official story behind this, from the oil barons, is that refining capacity is stretched to its limits.
A little more than a year and half ago the issue was thrust in front of consumers as Hurricane Katrina sent pump prices soaring across the continent by knocking out 40% of the Gulf Coast's oil refining capacity. But as the pump prices subsided, so did public concern. Gordon Wong, spokesman for Imperial Oil, says there is no quick remedy to the situation. "It's not going to clear itself up overnight. It's going to take some time before we're back up to the normal supply level." The current situation has developed slowly over the past few decades as refinery output began to peak, demand increased, and little refining capacity was added to the North American market, according to Michael Ervin, president of MJ Ervin & Associates Inc., a Calgary company that tracks fuel prices. Refineries are generally utilized at 95% capacity in Canada over a 12 month period. In the summer, when demand increases by 25%, Canada is forced to import gasoline from Europe to meet its demand. This is outrageous. Canada has more than enough gasoline to supply the country, even with all that we ship to the US, and yet we have to import the refined material from Europe to see us through the summer? Why?
Because, even with such a tight supply, oil companies have refrained from building more refineries. They are costly and historically not as profitable as other areas of the oil industry. Herein lies the crux of the matter. Profit. With oil companies reporting record profits almost every quarter, it seems that is all they're interested in, the bottom line. But even if they are not as profitable as the other areas, does it make sense to make no profit at all? Sorry, I'd rather have 2% of something than 0% of it. I know it doesn't compare with 50% profit, but if I'm looking at keeping the shareholders happy, I'll squeeze every dime I can get. Jeff Hazle, technical director of the Washington-based National Petrochemical and Refiners Association, estimates return on capital at refineries is about 5% as an industry average, and says, "Most investors won't invest in a project at that level." I would. It's 5% I didn't have yesterday. And 5% of a million dollars ($50,000) beats that (if you can get it) 30% raise on your $50,000 ($15,000) annual salary.
There hasn't been a grassroots refinery built in the U.S. in nearly three decades. Seeing that we are so dependent on oil, Marathon Oil Corp. plans a significant expansion at its Louisiana refinery and Motiva Enterprises LLC expects to increase capacity at its plant near Houston. Arizona Clean Fuels also has been trying to build a refinery in that state. Here in Canada, New Brunswick's Irving Oil plans to build a $7-billion refinery in Saint John by 2012, with a capacity of 300,000 barrels a day, primarily for export to New England.
I'm as much for fair, not free, trade as the next guy, but shouldn't the oil refined by Irving go to Canadians first, with the leftovers open for export? What will happen when we have another ‘little fire'? The Americans will say tsk tsk, too bad, while we have gas line-ups reminiscent of the 70's.
A little more than a year and half ago the issue was thrust in front of consumers as Hurricane Katrina sent pump prices soaring across the continent by knocking out 40% of the Gulf Coast's oil refining capacity. But as the pump prices subsided, so did public concern. Gordon Wong, spokesman for Imperial Oil, says there is no quick remedy to the situation. "It's not going to clear itself up overnight. It's going to take some time before we're back up to the normal supply level." The current situation has developed slowly over the past few decades as refinery output began to peak, demand increased, and little refining capacity was added to the North American market, according to Michael Ervin, president of MJ Ervin & Associates Inc., a Calgary company that tracks fuel prices. Refineries are generally utilized at 95% capacity in Canada over a 12 month period. In the summer, when demand increases by 25%, Canada is forced to import gasoline from Europe to meet its demand. This is outrageous. Canada has more than enough gasoline to supply the country, even with all that we ship to the US, and yet we have to import the refined material from Europe to see us through the summer? Why?
Because, even with such a tight supply, oil companies have refrained from building more refineries. They are costly and historically not as profitable as other areas of the oil industry. Herein lies the crux of the matter. Profit. With oil companies reporting record profits almost every quarter, it seems that is all they're interested in, the bottom line. But even if they are not as profitable as the other areas, does it make sense to make no profit at all? Sorry, I'd rather have 2% of something than 0% of it. I know it doesn't compare with 50% profit, but if I'm looking at keeping the shareholders happy, I'll squeeze every dime I can get. Jeff Hazle, technical director of the Washington-based National Petrochemical and Refiners Association, estimates return on capital at refineries is about 5% as an industry average, and says, "Most investors won't invest in a project at that level." I would. It's 5% I didn't have yesterday. And 5% of a million dollars ($50,000) beats that (if you can get it) 30% raise on your $50,000 ($15,000) annual salary.
There hasn't been a grassroots refinery built in the U.S. in nearly three decades. Seeing that we are so dependent on oil, Marathon Oil Corp. plans a significant expansion at its Louisiana refinery and Motiva Enterprises LLC expects to increase capacity at its plant near Houston. Arizona Clean Fuels also has been trying to build a refinery in that state. Here in Canada, New Brunswick's Irving Oil plans to build a $7-billion refinery in Saint John by 2012, with a capacity of 300,000 barrels a day, primarily for export to New England.
I'm as much for fair, not free, trade as the next guy, but shouldn't the oil refined by Irving go to Canadians first, with the leftovers open for export? What will happen when we have another ‘little fire'? The Americans will say tsk tsk, too bad, while we have gas line-ups reminiscent of the 70's.
The Political Brief
The Florida Keys and Everglades
The Black Sheep Chronicles
What constitutes bad manners?
The male mystique
Debate Fan
L.A.M.P.
youranter
Opinions
opinionatedranter
Tales From The Green Lantern
The Florida Keys and Everglades
The Black Sheep Chronicles
What constitutes bad manners?
The male mystique
Debate Fan
L.A.M.P.
youranter
Opinions
opinionatedranter
Tales From The Green Lantern
The Florida Keys and Everglades
The Black Sheep Chronicles
What constitutes bad manners?
The male mystique
Debate Fan
L.A.M.P.
youranter
Opinions
opinionatedranter
Tales From The Green Lantern
Trudeau was a funny duck. He was a Liberal, but he was one that most everyone liked. He showed us all that he was the most powerful man in Canada during the FLQ crisis. Hell, even I liked him. He was a stauch federalist and truly believed everything he did was for the betterment of Canada. However, I can't forgive him for making our country bilingual. It's cost us billions to pander to the minority that speak French. Mulroney was a Conservative who did well in his first term. He ran the country like a business and cleaned up much of the mess left behind by prior gov'ts. However, during his second term, his head swelled and he thought of himself as some sort of royalty. I think he thought free trade was going to be just that, free. He failed to take into account the protectionist stance taken by the USA. Although warned free trade was not the way to go, he went for it anyway. And today we are still struggling with things like softwood lumber, wheat markets, etc. No dummy he, the writing was on the wall for him and he stepped down, appointing Kim Campbell, our first female PM to take over for him. She lasted about two days in the job (exaggeration here) and in the next election the Conservatives were reduced to only two seats in the House. If Mulroney had gone for fair trade, things might have been different.
BTW, when are you going to write something here? I keep looking for you.
The Florida Keys and Everglades
The Black Sheep Chronicles
What constitutes bad manners?
The male mystique
Debate Fan
L.A.M.P.
youranter
Opinions
opinionatedranter
Tales From The Green Lantern