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Tuesday, March 27, 2007

Gas "up" but heating down...

Well...Now that we're starting to get winter behind us maybe we'll start to see something "constructive" happen with heating and stove oil pricing.

I can't say the same thing about gasoline, although it could have been a lot worse than what I'm seeing out there. Consider the world situation before you assome we might get a break at the pumps though, because we're not.

So far, with another business day to go before we see prices adjusted, we're looking at around a cent up on gasoline.

Stove oil prices are starting to nose down a little, around 1.55 cents a litre down for this adjustment period.

That's about 5.8 cents a US gallon down to our friends south of the border.

Like I said, that's with 13 out of 14 days recorded. I'll have a "definitive" on Wednesday morning.

So, what are we looking at out there?

We've had some more fires at refineries again, this time a couple in Indiana of all places. I'm just waiting to hear of a loss of life at refineries as the oil companies try to keep the dollars ahead of demand. I can't wait to hear a Big Oil company explain to the media why it wasn't pratising good safety measures when their refinery blows up. Keping ahead of the supply/demand curve is getting to be a chalklenge that Big Oil is finding hard to meet. Unfortunately, we get to pay more for that notion.

Inventories are getting hit hard as a result as well. Consumers still haven't seen a brick wall on pricing, although this increase isn't a substantial one, it still signifies we have a way to go before consumers realize they're being tagged for their own consumption, far beyond the actual value of the stuf they're putting in the tanks. We are, in fact, the authors of our own demise on pricing.

The more we ignore the rise, the more apt we are to make a heavy impact on inventories, which means?...You guessed it..the more we impact the price.

$1.13 and change might not sound like a lot to consumers elsewhere like Europe, but it sure is a heck of a lot here, and it's going to get worse.

See, this is the season when, directly before the summer deand season, we see increases in gasoline inventory, in spite of refinery shutdowns.

Not this year...

I think this is the first year I have seen in my ten years of analysing pricing that gasoline "user season" has actually matched the demand for distillates in the winter season.

Another analogy and a little prediction too. You are going to witness the summer season become matched to the gasoline demand season. Why?

Jet fuel demand is up and, if the economy remains strong, distillates like diesel will be in hreavy use just to keep the goods moving to eager consumers.

When the tractor trailers move, pricing does too.

That means a higher starting point for which heating and stove oils have to begin the run-up in pricing for next winter. Not enough time to build inventories and a strong demand.

Could be a cold one for some...

Lastly. Keep an eye to the Iran and United Nations situation, all over Iran's "want" of a nuclear program. They think they have the right to produce energy by nuclear programming while the world outside of the Russians and China seem to think they don't. The "arrest" of 15 British sailors from the HMS Cornwall in the Persian Gulf will also start to figure on pricing as the Middle East again heats up bringing pricing up along with it.

See what happens on Thursday but pass the word for now...



Tuesday, March 20, 2007

Equalization hullabaloo

The realities of the equalization pact between provinces and the federal government are specifically for one purpose; that of getting provincial governments off the "welfare" roles and give them the opportunity to prosper using the resources they have at hand, new or old.

What the latest Tory government program has said to Newfoundland and Labrador seems to ride hand in hand with any governments policy on welfare or employment insurance; "You've got yourself in a position where you can make an abundance of money so, it's time to take you off the welfare roles".

Far be it for me to say that, perhaps we have come into the future because it wouldn't be politically correct to say that. This equalization program that has put the "screws" to Newfoundland and Labrador comes hand in hand with what we are told is happening to our offshore resources, that we are seeing big benefits from our offshore resources. While we hear the provincial tories saying that it's all good here on the Rock, the federal government seems to recognize the fact as well and that seems to be whats got the "bee in Danny's bonnet".

The whole purpose of the Atlantic Accord was to advance the offshore industries to the point that we could see the ultimate benefits like Alberta does, but the irksome realisation is that we can't see that for the forest that has grown before our eyes, created by the present administration in the province. It was Brian Mulroney who said that he "wasn't afraid to inflict prosperity on the people of the province of Newfoundland and Labrador".

Maybe the feds really weren't afraid to do it. Maybe we were afraid to accept the reality that we would profit by the offshore accord signed in 1985.Are we afraid of seeing the money come in? Are we getting paranoid of making deals so much that we can't accept the status quo on this one?

I don't think we got the screws on this one. I think we saw the premier put the screws to us. He hasn't signed a deal and time is running out now on the Atlantic Accord. The reality is that the Atlantic Accord could be a story of lost opportunity five years from now.

How so?....

It's like this. Had we seen the other offshore fields progress to the point that they were bringing in untold revenues, would we really care if we had to receive equalization again?

That's the question that none of the Try provincial politicians seems to want to answer.

Are we afraid of making a deal?

Thursday, March 08, 2007

The Offshore Oil Industry is now on Life Support

...but, what do I know about the oil industry...

So, I'm thinking after reading the Globe and Mail article that, maybe the offshore oil industry has just been put on life support.

Hibernia South...Hebron-Ben Nevis...

We don't have a fishery that would be worthy of the inshore fisherman to talk about. The economic powerhouse, the center of trade for large fishing companies that was St. John's, was thrust inexhorably into the oil industry just a short 25 years ago, with oil rigs punching holes in the seabed some 200 miles out in the search for "light-sweet".

Houses bloomed in areas where we tore down the trees and then named the subdivisions after wood groves of them. People from distant countries who were used to starting up the engines of oil-based economies moved here and set up home, wives shopping at the malls while the men in the suits worked in the "towers" of the old, musty, fish-scented downtown core.

There was hope in some of those buildings, and in the buildings where the politicians fought, that "have nots would be no more",... that "I'm not afraid to inflict prosperity on the people of the province of Newfoundland and Labrador"...

I guess after today, we may have found out that someone in the Confederation Building just might be afraid to inflict prosperity on the people, huh?

Today, Exxon-Mobil packed up their dinkies and they're now heading out to play with some other kids in their sandbox. Today, we found out that Exxon-Mobil has written off their offshore interests until sometime after the year 2010.

For some reason, I think my property here in Paradise just lost a couple of thousand dollars in value.

Can I sue for that I wonder??

They've parked a project that could have brought Newfoundland and Labrador off transfer payments and we wouldn't have given a damn if the federal finance minister had paid us a visit again...

Now that we won't have those revenues, those offshore jobs, those economic spin-offs from the industry, well....I guess we just found out that the province just hit the brick wall and we'll all be saying "good-bye" at the airport a few more times yet.

And, I guess we'll be seeing a whole lot more of the federal finance minister again...

Faint hope, I guess...

Letter to Natural Resources minister of Canada, Gary Lunn
Here's a copy of the letter I sent to Natural Resources Minister, Gary Lunn the other day. I figured i would list this one as a matter of interest to consumers in Canada and the United States.
Feel free to leave a comment...
Mr. Gary Lunn March 05, 2007
Minister of Natural Resources
Government of Canada
House of Commons
Ottawa, Ont.
K1A 0A6

Dear Mr. Lunn,

I am writing to you in the hope of expressing concern for the ongoing shortage of gasoline and related commodities and, in the hope I may be able to share my years of research with a small synopsis of the situation as well as possible solutions.

I also hope to share some possible solutions to the problem in the hope the Government of Canada may formulate policy to avoid such troubles in the future, as well as have the present problem solved. I have some nine years experience in learning about the workings of the oil companies as well as becoming quite knowledgeable on all aspects of how pricing to the consumer is performed.

As you well know by now, the Imperial Oil Nanticoke refinery in Ontario suffered a fire which drew Imperial’s refinery capacity out of an already stressed marketplace. That, in turn, has helped work pricing up on a consumer level that some find unbearable and others, like tourism industries, are showing concern for the summer season.

High prices, as we well know, not only hinder the economics of the country, they hurt the spending of the Canadian consumer. They show restraint and that’s not good for business in the country. Consumers want to know that there is “fairness’ in the marketplace and not an edge to one group or the other. We recognize the right of business to make a profit on an even playing field as well as recognize the need for petroleum-based product that the rest of the country may require in the future.

The problem that the Imperial Oil refinery closure caused was the straw that, effectively, broke the consumers back and it was a rude awakening to the capacity problem that the consumer faces in this country. While we lost a refinery in central Canada, prices have been affected in all reaches of the country and on world and North American markets.

While it wasn’t the only accident we saw in North America over the past couple of months, it was enough to add some stress to an already stressed price on the markets for refined gasoline product. This is the highest wintertime gasoline spot price I have recorded since first taking stock of price trends and the highest starting point for prices leading up to the summer driving season.

The writing is, effectively, on the wall for high pricing this season barring any unusual circumstance like economic collapse or very strong inventory builds.

What this refinery shutdown tells me are several things that I hope government will consider for future policy. These suggestions may seem to be controversial and will probably be susceptible to others who know slightly different. A lot of these suggestions will also work in the long term because they become the impetus by which consumers and industry get to both build, and conserve.

Here are several suggestions of which I hope you can consider:

The lessons of the shortages in gasoline have told us that this country has no grip on how much Canada consumes as a country. It also tells the consumer that we consume beyond our means and are only limited by how much Canada can produce. Bearing that in mind, the Government of Canada should immediately take steps to create Canada’s own “Energy Information Administration” that includes:

Mandatory reporting and publishing of available refined product by type.
Mandatory reporting and publishing of crude oil data and inventory.
A weekly summary of crude supplied to the markets.
Numbers to substantiate crude oil exports.
Numbers showing refined product exports by country and quantity.
Numbers that show available Canadian refinery capacity.
Numbers that show available refined inventory data by area of the country.
Show data for all petroleum products used in the country including natural gas.
Include daily postings via the Internet of cash petroleum pricing of all petroleum products.

These are just a few ideas for this new branch of the Natural Resources department should entail.

What effectively happens is that the country becomes more aware of what it consumes and the traders on the New York Mercantile Exchange and others, become sensitive to the availability of Canadian supplies of petroleum and related products. If Canada has ample inventories of product that is supplied to protect Canadian consumers’ needs, and there is extra on hand, then these refined products can become a wedge to drive prices down on the markets. Traders speculate on available inventory in Canada as well as their own market.

It would not be likely that, should Canadians see inventory of product in Canada protected for the interests of Canada and Canadian business, pricing would rise or be excessive to the consumer. If they saw on a weekly basis that inventories of product were dropping, and that pricing may be affected on the interim on the markets, they would be more likely to save and practice conservation to prevent any increase in product pricing. Mandatory reporting on the part of the oil companies in Canada, along with data gathering by personnel of the Natural Resources department, will also help oil companies gauge what and how much to produce from month to month. This has an immediate impact of saving a refinery’s energy and helping keep Canada’s environment a little cleaner.

Industry, particularly those that use heating oils and natural gas, will likely be able to track pricing and available petroleum inventory and make judgmental decisions on what type of heating fuels to use on a yearly basis as industry does in the United States. They make decisions on what type of fuel to use based on long term costs to their factories.

In closing, the government of Canada also has to put in place a mandatory moratorium on any further closures of refineries in Canada until it can figure out how much Canadians are consuming versus the refined product that is produced in this country and available to the Canadian consumer. Nothing else is asked of this country besides looking after the consumer environment as well as his or her future needs as well as those of Canadian industry. Ironically, it was a closure of the last refinery within Canada that may have put the industry itself on a tenuous road to problems for the consumer, that refinery having closed in Sarnia, Ontario just within the last two years.

The Government of Canada must take the steps to recognize its own citizen’s needs as well as those of future consumers of petroleum products. It also has the duty to protect as much of the resource as those citizens will need in the future. That responsibility should include environment concerns balanced with the needs of Canadians first and it has to become the lever against traders in the U.S marketplace.

These thoughts are also available in a report I made to the Standing Committee on Gasoline Pricing in Canada some years ago. If you desire a copy of that report, please let me know and I will forward a copy to you via mail or via email.

With best regards,

George Murphy
Group researcher/Member
Consumer Group for Fair Gas Prices

Monday, March 05, 2007

Don't look now!
Nova Scotia, New Brunswick and Newfoundland and Labrador to see
increases this week!
I'd rather you all get some kind of notice than none at all.
Truth of the matter is that everything is pointing up, although it looks like heating and stove oils won't be a part of what has been happening this time around.
With a couple of more trading days to go, Newfoundland and Labrador will most likely see Early Interruption to pricing.
Too early to say exactly how much but preliminary numbers are suggesting as much as an 8 cent per litre increase could be on the way.
I'll have more sometime Wednesday morning on this one...
Keep an eye.