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Wednesday, November 20, 2013

Numbers for Thursday, November 21st, 2013

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!


George Murphy
Twitter: @GeorgeMurphyMHA

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