To the Editor: On Rising Gas Prices

Dear Editor,
RE: “We need to be refining oil flowing through B.C”

I’ve seen many of the same complaints rise with gas prices.

“It’s a Plot by the Oil Companies!”
“It’s Government Taxes!”
“We need more Refineries!”

In fact the rises are due to none of those things.

The first two don’t affect the day-to-day rise and fall of gas prices any more than they affect the cost of a loaf of bread.

No one complains when bread and milk are the same price when we go from grocery store to grocery store, why would we complain about oil companies rising their prices in tandem as well? Prices rise and fall slowly and in tandem… no collusion, it’s just the market.

Similarly, while government taxes certainly make up a big part of the price of ‘things’ it doesn’t move up and down like crazy, so that’s not what is causing the rising gas prices either.

The last point though, speaks to local supply and demand, which gets closer to the truth. A quick look at the stats shows (NEB Canada Excel Files) that refinery capacity in Western Canada is almost double what Western Canadians actually consume. The rest is exported. So that’s not it either.

Refining Capacity in Western Canada: 109,000 cubic metres per day (m3/d)
Most recent (March 2011) maximum in refinery usage: 100,000 m3/d (90%)
Net Exports to US March 2011: 60,000 m3/d
Left over (ie. Domestic Western Canada consumption): 40,0000 m3/d (36% of refinery capacity)

The only reason left is global supply and demand. There we see that oil production has not risen significantly since 2005.

This post on World Energy Supply and demand here talks about all forms of energy. It includes the graph below that shows oil production leveling off (look at coal production! wow!)

Here is that graph zoomed in to the last 40 years which shows the plateau better:

And here is a graph from another post at The Oil Drum showing price over the past decade. Notice how crude supply has barely budged, but prices have been wild as the economy hits limits, crashes, then recovers… and presumably will crash again.

Prices were stable around $20 in 2001-2003 and then things started to change.

Prices rose through 2008 until the economy crashed. Now with possible recovery in the US, global production still hasn’t broken out of its 7 year funk and the price is rising even though billions are been invested in the tar sands and oil shale.

This is the reality of global peak oil. Unconventional oil has kept us on a plateau for 7 years, but eventually, declining great oil fields elsewhere will be too much to compensate and world production will decline. The economic and geo-political repercussions are predictably unpleasant.

The message is simple. We are part of the world and so are our gas prices. If the world is to insulate itself from gyrations in oil prices, then we must use far less of it, starting here at home.

Chris Alemany
Member – Alberni Valley Transition Town Society
Port Alberni, BC