RE: Articles in the April issue about the Ontario fuel shortage.
First of all, permit me to introduce myself as a driver for the only oil company that still has a company fleet. Please note that none of the following comments are on behalf of the company. The views are from my driver’s seat only.
The front page article is somewhat naive. There were two fires at Imperial Oil refineries, one in the fall at Sarnia and the second at Nanticoke in February. The fire at the Nanticoke refinery was the proverbial straw that broke the camel’s back.
Whether or not CN Rail was on strike had very little to do with the fuel shortage. Please observe, the next time you are sitting at a level crossing in Southern Ontario watching a train pass, how many rail cars have the ‘Red 1202 (diesel) or 1203 (gasoline) Placard’ on them?
The short answer is ‘very, very few,’ mostly those headed to more remote places in the province (mines, a few dealer/distributors).
The 500,000 litres that was moved into the province per day by Petro-Canada is nothing more than a drop in the bucket. Consider that this volume only represents 10 to 12 truckloads per day.
More fuel is shipped from the GTA terminals at Finch and Keele in Toronto in the first half hour of any given day of the week. This extra fuel was not even close to meeting Petro-Canada’s own needs.
It was never communicated once to me, during the shortage, that extra hours-of-service were available. This must have been the best kept secret of the whole incident. But, if the pipeline cannot supply the fuel to the terminals, the trucks cannot fulfill their function. At that point, all the extended hours-of-service mean nothing.
In Southern Ontario, fuels move by truck over relatively short distances from the pipeline-fed terminals of the four major oil companies serving an area which extends as far north as Hwy. 11 and then some.
These pipelines move huge volumes of fuel.
All the use of the pipelines is contracted out years in advance. These same pipelines are basically running at maximum capacity for maximum profit and to obtain minimum costs at the present time. Imperial, Shell and Sunoco all have refineries and terminals in Southern Ontario.
Petro-Canada mothballed its refinery in the area in May 2005, and has no capacity whatsoever to produce or change over production to diesel fuel in this province. Furthermore, the fuel from Petro-Canada, for this geographic area is either purchased on volume-specific contracts from the other refiners or via a pipeline, which is at/near maximum capacity, from their Montreal Refinery.
Fuel moves in a pipeline at a speed of 8-13 km/h, taking two days to get to the GTA terminals from Montreal. Refineries do not just turn the switch and diesel starts pouring out instead of heating oil or gasoline. It’s a long, slow process.
Question: Have you seen anything in here yet, that even remotely shows how this area of the country will be able to react any differently when the next fuel refiner has a similar fire or outage? Fires and outages at these refineries are not uncommon; it’s really a matter of degree of severity.
From my driver’s seat, I cannot see any change for the next time, with the ‘just in time – just the volume required’ fuel system we have in Canada.
No refiner will volunteer to keep two weeks’ fuel supply on-hand.
The supply issue will have to be like most other initiatives, from flaring off gases at the refineries, to ultra low-sulfur diesel and ethanol gasoline.
The government will either mandate the change or it will not be done.
None of the three aforementioned issues were producer- driven and all had very long lead times.
Also remember that if you want this type of preparedness, you will have to pay for it.
The lead time on these larger issues, which this is, is usually about five years at least from the day the government signs the bill into law.
And finally, if you want the gouging at the pumps to stop when these types of incidents occur, that will have to be legislated as well.
An oil company regards itself as a price-taker not a price-maker, therefore when one company’s price goes down in an area the rest follow in hot pursuit.
This is done to not lose market share for that refining system that keeps kicking out the same volume no matter what the price is. By the same token, when one refiner’s price goes up the rest follow in the same hot pursuit no matter what the reason.
The so called “perfect storm” was not a perfect storm at all. It could easily happen again.
A fire at any refining facility in Ontario or worse still at Montreal would create the same conditions again.
You cannot expect to remove that quantity of production from this integrated marketplace and expect it to be picked up by the remaining suppliers.
The refineries that presently supply fuel to this geographic area produce very small volumes and are not known as ‘world-class’ by any stretch of the imagination. The new Shell refinery, which may be built in Sarnia, will probably take 10 years to come on line. That will likely be more than a couple of years late to take up the estimated new volumes that will develop over that time frame.
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