International news might bite consumers

Just a note to let everyone know that I am watching the situation in Libya play itself out on the international markets the last couple of days. It's not the best news economically, but should prove to be a wake-up call to everyone dependent on Middle East crude supplies, including Canada.

First, the numbers...

Here's what I have so far, keeping in mind that the markets were closed and I have no data for today, except the above futures prices that would "add' another possible 2.6 to gasoline numbers, and the same to the heating, stove and diesel numbers. I'll leave it to one's imagination what the cash numbers would be as a result of today's news.

Either way, the numbers are up.

• Heating and stove oils show an added 17/100ths of a cent.
• Diesel shows an added 6/10ths of a cent, and...
• Gasoline shows up by 1.4 cents a litre so far.

In the news

So far, crude oil (WTI) has been affected by events overseas, all in spite of the markets being closed for the Presidents Day holiday in the US. Electronic trading has seen WTI settle at $92.75 US a barrel, an increase of $6.55 a barrel US. crude oil has not been this high since September, 2008.

Heating oils and gasoline are also well up in trading, up by 11 and ten cents a US gallon respectively.

No doubt, consumers will be hit with increases in price across the board this week as supply disruptions have a very good chance of playing out in the Libya protests. According to Bloomberg, the Nafoora Oil Company operating in Libya have already shut down operations and production because of a general strike, shutting down almost 100K of oil production.

Libya is OPEC's eighth largest producer and exporter of oil, supplying the world with 1.6 million barrels per day, or one per cent of production. That might not seem a lot, but with the possibility of disruptions occurring here with other oil companies that are now pulling international staff from Libya, we could be headed for a record week in oil pricing that could rival the Katrina hurricane event. What happens here could happen in Iran and other OPEC producing countries that could send the world back into recession again, well ahead of any economic recovery.

Warnings here for Canada

While Saudi Arabia may be able to pick up any production that would cover the losses due to disruptions of production in Libya, it does not have the spare refinery capacity to cover off any disruption in production from Iran, and that spells trouble for the rest of the world dependent on OPEC production, including Canada. This country still imports some Middle East oil, while, at the same time, being self-sufficient in oil production. While we could recover any losses in domestic consumption of oil by using our own sources of supply, the government needs to ensure that Canadian consumers and industry are covered here with sufficient domestic supplies before any further exports are allowed to other countries dependent on our resources.

Pretty simple really. Don't sign any more deals that ensures a safe supply to outside countries before you use your own resources for your own people first.

That's it for now!

I'll be back tomorrow night with a final breakdown on what to expect this Thursday.

Just keep in mind that anything could happen in the next day or two with this extraordinary situation in the Middle East.

Regards,

George Murphy

Group researcher/Member

Consumer Group for Fair Gas Prices