Gas shortage a symptom of big Ontario problem, group says

Last Updated: Wednesday, February 21, 2007 | 7:08 PM ET

CBC News

An Ontario refinery fire has left gas stations with dry tanks and higher prices because the province depends too heavily on imported fuel, an independent retail group says.

Jane Savage, president of the Canadian Independent Petroleum Marketers Association, said the Feb. 15 fire at Imperial Oil's Nanticoke plant has triggered "a very severe shortage."

About 75 Esso gas stations in southwestern Ontario have run out of gas. The company says it could be days before supplies return to normal.
(CBC)

"I'd characterize it as probably the worst supply situation the industry here in Ontario has seen in decades," she told CBC News Online on Wednesday.

Speaking from her east-end Toronto office, Savage said the shortage has been accompanied by a rise in the wholesale prices charged by Imperial and other refiners.

But she joined other industry officials in urging drivers not to panic and not to hoard fuel, which she said is unnecessary and would worsen shortages and drive prices higher.

Ontario's basic problem is a lack of refining capacity, partly a result of the closing of an obsolete Petro-Canada refinery west of Toronto in 2005, she said.

There have been other recent glitches, however.

"We had a problem at Imperial's other refinery over the holidays," she said. "There's the rail strike, which has chewed up the transportation network pretty badly. So getting product is hard in a landlocked province which is net short of refining capacity."

Supply line long

Drivers encountering locked-up pumps this week at scores of southern Ontario gas stations — some under Imperial's Esso banner, others supplied by the company — can testify to that.

Although a small fraction of the province's thousands of gas stations ran out of fuel, pump prices moved well above 90 cents a litre in many places, up from the 70s in January's mild spell.

The crippled refinery normally converts 118,000 barrels of crude oil a day into about 12 million litres of gasoline and varying amounts of jet fuel, heating oil, diesel fuel and other products, Imperial spokesman Gordon Wong said.

The fire has temporarily halved its gasoline output and also reduced production of diesel and heating oil, he told CBC News Online.

Imperial hopes to avoid having furnaces go cold at this time of year, he said.

"We're giving priority to heating oil customers."

Savage said Ontario is too dependent on refined fuel landed at Montreal and pumped west by pipeline.

"These are cargos that are on the water and are being traded and diverted into Montreal, so it's European refineries, generally, and eastern U.S refineries."

"The supply line into Ontario is a long one," she continued, "and when you get a refinery that has another problem on top of that, you're into some pretty significant issues, as we're seeing right now."

A former Imperial Oil engineer, Savage now represents large independents such as Canadian Tire, Pioneer and OLCO. Those companies buy their fuel from Imperial and other majors.

"Independents, as I think folks know, are just overgrown consumers. We buy directly from the refiners, just in bigger quantities," she said.

Spread between prices widens

Not only have the prices they pay jumped, but the spread between local and international prices has widened, she said.

On Monday, the Toronto wholesale gasoline price (known as the rack price) was 7.7 cents a litre above a benchmark New York cargo price, she said.

That represents an increase of 3.2 cents since Feb. 14, she said, and the highway diesel fuel spread widened even more.

At the same time, the international price rose about a penny, she said.

She declined to speculate on whether the Ontario shortage has emboldened operators to raise pump prices beyond their cost increases.

Despite the shortage, she stressed the folly of fuel hoarding.

"Panic would be the worst possible thing here in terms of the public, and only because it would cause more shortages and more price increases.

"There's no need to panic from the public's point of view, but I do want to be very up front with people about the fact that I think our governments need to take some action on improving our supply networks here."