Mainstream Disinformation - Why gas prices are going up

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Gas prices shoot up across Canada on Friday as U.S. refineries affected by Ike

Fri Sep 12, 2:39 PM

By Kristine Owram, The Canadian Press
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TORONTO - Gasoline prices spiked Friday by as much as 13 cents a litre in some parts of Canada as refineries on the U.S. Gulf coast shut down operations ahead of hurricane Ike, sparking consumer frustration and pressure on governments to curb soaring fuel costs.

The price for gas at stations throughout southern Ontario soared by about 13 cents a litre early Friday to more than $1.36 a litre. Prices in Ottawa were also up by 13 cents.

In Montreal, prices jumped about a dime to $1.38 a litre, while Halifax prices were up to about $1.33 a litre and $1.42 in parts of Newfoundland.

Prices in Western Canada did not move as much because they have trended higher in recent weeks because of a regional supply shortage. In Vancouver, the highest per litre pump price was more than $1.40 at many stations, while Calgary prices ranged between $1.10 to $1.41.

GasBuddy.com, a website that monitors North American fuel prices, said the average price Friday in Canada was a shade under $1.33 a litre, compared with $1.05 a litre a year ago.

One customer at a Petro-Canada (TSX:PCA) station in downtown Toronto said the price at the pumps was "atrocious," while a tow-truck driver described it as "robbery."

"I was shocked, it was unbelievable," said tow-truck driver Brian Legere.

"It's nuts, it's not even funny anymore. I can't even fill (my truck) up because it would be too much all at one time."

Blair McQuillan lives in the country and commutes to Toronto for work.

"My car's basically my transportation everywhere, so I'm pretty much a victim of the prices," he said.

"I was definitely surprised. Now you're paying extra money just to get to work and do your regular business."

Bruce Jannings works for an autobody shop and said he greeted the price hike with "shock" and "outrage."

"I couldn't believe it, we're getting hosed again, you know?" he said.

"The government does nothing for the people, the price goes up and they just sit back and collect money. They rake in millions of dollars and screw the people of Canada."

At a federal election campaign stop in Halifax, Prime Minister Stephen Harper said it "appeared" to be the case, when asked if there was price gouging going on.

Harper did not promise any immediate action, saying the Conservatives would make related policy announcements later in the campaign.

"We are prepared to take steps. I'm not going to make up policy on a day-to-day basis," said the prime minister, who recently announced a two cent a litre cut to federal diesel fuel taxes to help the trucking and rail industry hit hard by energy costs.

"We do have some announcements in this area that we'll be making as the campaign progresses."

Earlier this summer, criminal charges were laid against 13 people and 11 companies for fixing gasoline prices in Quebec. Three of the companies pleaded guilty and were fined a total of $2 million.

Peter Boag, president of the Canadian Petroleum Products Institute, said the price spike is the result of an integrated North American fuel market, not price fixing.

"There's no unique Canadian market for fuels, we operate in the context of a North American market for fuel, so things that happen anywhere in North America have an impact on fuel prices in Canada," said Boag.

Refineries shutting down in the face of hurricane Ike, combined with other refineries that are only now coming back online after hurricane Gustav, means North American refining capacity has been reduced by 15 to 20 per cent in the last couple of days, said Boag.

"We've got a significant supply issue as a result of those weather conditions," he said.

"Supply goes down at the wholesale level, prices go up."

Boag said it's difficult to know when prices will drop again, but he said past experience indicates this will be a "short-term issue."

Liberal MP Dan McTeague, who has gained a reputation for predicting pump price increases based on the wholesale market in the United States, predicted more increases for Canadian motorists later Friday.

News of the looming increases had motorists lining up past gas stations in several Canadian cities as they tried to beat the jump in price.

The threat of hurricane Ike to Gulf Coast oil refineries, mostly in Texas, sent wholesale gasoline prices in the U.S. soaring Thursday over supply concerns.

As well, U.S. gasoline supplies have dropped by several million barrels over the last week, according to data released by the U.S. Energy Department.

While McTeague said the threat posed by the hurricane was the "spark" that triggered the increase, he also pointed the finger at the Canadian oil industry.

"The proverbial fuel on the fire is in fact the distortions by an unresponsive, uncompetitive market that has actually been diminishing its output," McTeague said in a phone interview from his Toronto-area riding where he was campaigning for re-election Thursday night.

Federal competition reviews of the Canadian industry have repeatedly determined it is highly competitive and reacts to changes in the continental market for gasoline, which is traded as a commodity just like wheat, grain, nickel and oil.

Exxon Mobil Corp. (NYSE:XOM), Valero Energy Corp., ConocoPhillips (NYSE:COP) and Marathon Oil Co. were among the companies halting operations at refineries on the Texas coast as Ike churned toward the state.

Refineries along the upper Texas Gulf Coast account for about one-fifth of U.S. refining capacity. Exxon Mobil's refinery in Baytown, outside Houston, is the largest in the United States.

In a related development Friday, a North Carolina-based convenience store chain asked U.S. customers in 11 states - mostly across the Southeast - to limit gasoline purchases to 10 gallons to avoid a run on supplies.

Another veteran gas-price watcher, Jason Toews, who runs GasBuddy.com, said fear of Ike carried over the border to Canada.

"With the hurricane in the gulf certainly going to cause some problems with supplies of crude oil and gasoline, mostly refined gasoline, in the U.S... it may have ripple effects all the way up to Canada," Toews said.

"What they have to do to fill that void is bring in gas from neighbouring states, and it has a ripple effect because those neighbouring states all of sudden don't have enough gas and they have to bring in gas," he said.

"Gas is trucked in from across the region, and across the (United States), and from Canada."

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