Artificially rising demand?
Why you’re getting dinged this week
St. John’s, NL., November 20,
2013 - “Consumers will see a strange occurrence this week when the Public
Utilities Board adjusts prices. They’ll be increasing them.” That news from
George Murphy, MHA for St. John’s East.
“Consumers may notice a
slight bump upwards this week with prices for refined commodities rising out of
sync with the trend in oil prices. While supply disruptions again are happening
in North Africa and the Middle East, the trend toward importing available stock
from North America has now been putting pressure upwards on prices this last
week or so, and it’s a problem that the oil industry has created all by itself
that could occur here, if it’s not already happening.” Murphy said.
Why diesel and other
distillate prices are out of whack…
“Over the past seven years or
so, I have counted at least fifteen refineries in Europe that have closed down
out of close to one hundred, due to lower refiner margins and what one could
call the sharing of supplies between companies. We know it here as reciprocal
sales arrangements, where one company would share inventory with another
and, at the same time, close down un-needed refinery capacity. When they do
that, if demand suddenly increases, particularly for distillate fuels like
heating oils and diesel fuel, then North American and European consumers get
hit with price increases because of ongoing exports to Europe.
“The same thing is happening
here. If the closure of refineries doesn’t stop in North America, we as
consumers could end up competing with European consumers for the same refined
product, thus driving up prices. That certainly appears to be what’s been
happening with us the last few months.”
“That’s simply several
reasons why Diesel fuel is so highly priced over gasoline: it’s a predominant
fuel of choice by the transportation sector in Europe. Unless there’s a strong
build in North American and European inventories, then consumers can expect
more of the same. Coupled with rising demand in Europe and an engineered
shortfall in production, and you have a perfect mix of reasons to increase
prices. Simply put, changes are needed to both European and Canadian rules that
govern competition between companies to correct the market. It’s simply too
easy to sway the markets and influence prices as a result. This scenario may
already be rearing its ugly head in Europe, influencing prices here with the
need for more product by consumers there. They’re exporting product to Europe
where they’re getting top dollar.
Latest supply disruptions
The ongoing violence in Libya
has shut in close on 1.6 million barrels a day of oil production. There’s
simply no timeline on when things may come back to normal. As well, we’re dealing
with some cutback by some of the OPEC countries who continue to worry over
ever-increasing US domestic output. While US production domestically have
reached a new record of 7.9 million barrels a day, a million per day more than
last year, OPEC nations have cut back on some production in an effort to
maintain present pricing levels.
Numbers for this week
Here’s what I have for this
Thursday’s price changes. All data in:
·
Heating and stove
oils show up by 1.79 cents a litre.
·
Diesel adds
another 1.9 cents a litre, and…
·
Gasoline shows an
added 3.1 cents a litre.
That’s it for this week!
Regards,
George Murphy
Twitter: @GeorgeMurphyMHA
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