27 February 2007

Shape of things to come?

Is this what we should expect in a situation of real declining production volumes? Man, I can't believe how widespread this has become over a single fire in a single refinery. For how delicately balanced this entire fuel delivery infrastructure is, we sure put a lot of faith in the 'fact' that it will always be there and always be operational.

Gas shortage fears grow

Roads across Ontario will become parking lots unless something is done to alleviate a growing fuel shortage that has already caused the closure of scores of service stations, a senior executive at the Ontario Trucking Association is warning. As of last night the problem had spilled over into Quebec, with at least 10 stations closing down, according to the newspaper La Presse. "We have some carriers entering a critical stage and if this continues into next week, trucks will be running out of gas and stopping on the highway," said Stephen Laskowski, vp of the Ontario Trucking Association. As shortages increase, prices have shot up as much as 25% for some kinds of truck fuel, Laskowski said. Gas has jumped from 81¢ a litre to nearly $1. A fire at Imperial Oil's refinery in Nanticoke, ON, 10 days ago forced the company to ration supplies and now the problem is spilling over to the company's competitors, including Petro-Canada, which was forced to temporarily shutter as many as 30 stations yesterday and institute a rationing program just to keep up with demand. Last night, Shell Canada said it was also having problems at its refinery in Quebec, but did not elaborate. Gordon Wong, a spokesman for Imperial Oil, said the company has cut back on sales of diesel by 60% and gasoline by 40%. Imperial, which sells gas under the Esso banner, has also been forced to close some of its stations, but the company was unable to say how many. Imperial said it expects to get its refinery back up to full production by the middle of March. But that may be too late for many in the trucking industry.
(National Post 070227)


Jeff Skybar said...

Oh Reid, I hear you. It really shows how dependent, we are on fuel and just how much we use daily. I know our company alone sent 500,000 litres of fuel to Ont. We have a real problem. And yet in the news they showed some woman filling up her big SUV while she complained about people filling up gas cans for things like snowblowers. The whole situation is laughable, I don't know who is wore, the woman in the SUV or the guy that can't shvel a walk?

jetboy747 said...

The real concern, or where the real concern should be, is the age of these facilities. They're all bloody old. It's only a matter of time before something pretty catastrophic happens.

But, with oil companies barely making a profit these days, they can't afford to build new ones now can they?

Reid Dalgleish said...

It's freaking nuts. A lot of the sites I read ask the same question -- "why is the infrastructure so old and why has it been allowed to go that way?" Economically, they say, the only reason that makes any sense is that the oil companies are well aware that they are facing shrinking inventories as we go over the 'peak oil peak' and since there will be continuously less oil to process, to build new capacity would be economic suicide. Thus, they make due with what they have, allow the infrastructure to detoriorate and retire this stuff offline as it reaches the end of its lifespan.

Scary thoughts, and only begs the question, "What else aren't they telling us?"

This answer makes a lot of sense to me, as I can't think of any other rational reason why they aren't replacing infrastructure. The only reason they're wanted to build new stuff in Alberta is because they plan to quadruple output from the Oilsands and want to process it locally. The only reason the Saudi Arabians are building new capacity is in new refineries that will be able to handle their low-grade sulfurous oil, which seems to be pretty much all that's left now that the light sweet crude has all pretty much been sucked out and burned.

Reid Dalgleish said...

Once you see the flurry of amalgamations and takeovers start to happen in the oil industry, you know that the end is nigh....the only way a shrinking sector can continue to grow is to cannibalize itself.

doug said...

Oh the roller coaster of fuel prices has just begun I figure. From a financial perspective I think the transportation industry (Truck, Air, Rail) are all going to start to really suffer. Strategies such as using futures contacts for planning are going to be less effective and the premium paid on hedging will only get higher. Futures contracts simply aren't going to offer the bang for the buck that they used to. Put another way, underwriting such contacts is going to get alot more risky and that means more expensive -which means they will be less of a viable option. Put yet another way - the price tag for protection against unstable fuel prices just got higher.


PS Jeff, your Blog rocked today. The official debate score is Delusional Chritian Crusaders: ZERO (and thats after giving them credit for creative spelling)Humaity 100!

Doug said...

Ok Reid, I know I'm only allowed on comment per entry, but I know how passionate you are about oil and I was watching the Simpsons last night and killed myself laughing. So....Mr. Burns confronts that crazy Texas oil tycoon (the one always shooting the gun off yelling hee haw!) when he basically says Burns is an idiot, well Burns just hammers back back: "well at least I use use my brain unlike some people who stick poles in the ground looking for goo!"......its SOOOOOO true!

Danifesto said...

Hey thanks for visiting my blog and your thoughtful comments!

On this subject, gas is super-expensive overseas and it's probably high time that North America starts to feel the pinch like the rest of the world. Maybe this trend will push us to use more transit and develop more fuels like ethanol (rapidly growing in popularity in Kansas- where I'm from).

Reid Dalgleish said...

Diversification is definitely the key to a manageable energy future. This complete dependence on one energy source is stupid AND dangerous.