TORONTO, Ont. - A small fire at an Ontario refinery and a labour dispute at a national railway combined to create a major fuel shortage in Ontario late this winter, leaving some service stations dry a...
SITUATION CRITICAL: Brad Lawrie checks fuel levels at an Esso station that ran dry during the recent supply shortage.Photo by CP/Nathan Denette
TORONTO, Ont. – A small fire at an Ontario refinery and a labour dispute at a national railway combined to create a major fuel shortage in Ontario late this winter, leaving some service stations dry and driving up the cost of diesel at others.
Diesel prices in the Greater Toronto Area (GTA) spiked by as much as 20% following a fire at Imperial Oil’s Nanticoke refinery Feb. 15 and some carriers that purchase fuel in bulk were unable to get their tanks re-filled. Exacerbating the situation, CN Rail was in the midst of a labour dispute so fuel suppliers were unable to ship in diesel from other parts of the country.
Suppliers such as Petro-Canada ramped up fuel production by as much as 500,000 litres per day, and fuel haulers were given an exemption to Hours-of-Service regulations so they could put in some extra hours in an effort to get the fuel to service stations. Still, it wasn’t enough to avert a costly fuel crisis.
“You take one of the big fuel suppliers out of the marketplace and that is a recipe for massive price increases,” Ontario Trucking Association (OTA) president David Bradley said. “Carriers who are supplied by one of the other oil companies, depending on their contracts, might be protected somewhat in the short-term as are those that have bulk fuel held in reserve in storage tanks. But, once the fuel contracts come up for renewal, or the reserves run out – look out.”
There were some reports of fuel outlets refusing to honour discount cards and demanding cash from truckers. Other fuel stations implemented quarter-tank rations. Drivers were advised to fuel up outside the GTA – the further away the better.
The OTA called upon the federal government to intervene and allow for the use of off-road diesel, which has a sulfur level of 500 parts per million (PPM) compared to the 15 PPM standard of new ultra low-sulfur diesel. The higher-sulfur content was the industry standard until just last year and it can be used in pre-07 trucks without any side effects. It’s also easier and quicker to produce than ULSD.
“There are millions of litres of fuel that is perfectly suitable to use by trucks sitting in reserve, that we need temporary access to, but it’s not happening,” a frustrated Bradley said in a release. “It’s frustrating when you consider the risk to the economy.”
The OTA’s appeal gained support at the provincial level. Ontario Energy Minister, Dwight Duncan, sent an urgent letter to federal Environment Minister John Baird saying “Ontario’s economy is heavily dependent on trucking, and the trucking industry is solely dependent on diesel fuel.” He added that allowing truckers to use off-road diesel would “significantly reduce the negative impact on the Ontario economy arising from the current situation.”
However, the feds found themselves handcuffed by what Bradley referred to as a “regulatory straight jacket.”
ULSD is required by law for on-highway vehicles and the feds would have to introduce new regulations to allow for the use of off-road fuel. That would be, at minimum, a 60-day process. Failing to comply with current ULSD requirements subjects fuel companies to fines of up to $1 million and potentially even jail time, so fuel companies were not overly eager to supply their service stations with off-road diesel. Doing so would also have contaminated the tanks, which had to be turned over several times last year before the ULSD reached the targeted sulfur levels of 15 PPM.
As the shortage peaked, trucking companies were forced to shell out higher diesel prices and hope they could recoup the cost from shippers.
“Right now, all trucking companies can do is scramble to find fuel and pass along the increased costs to their customers,” Bradley said at the height of the shortage. “Shippers should expect a spike-up in their carriers’ fuel surcharges. If truckers can’t…pass on increased costs, they are out of business, and if they are out of business, Ontario’s economy stops.”
Indeed, the national economy was impacted by the shortage, according to some well-respected economists. Benjamin Tal, senior economist with CIBC World Markets, told the Globe and Mail that Canada will see a softening of its Gross Domestic Product (GDP) growth in February as a result of the fuel shortage.
“Whatever happens in Ontario will have a significant impact on GDP,” he told the Globe. “Currently, we are seeing a situation in which the combination of the rail strike and shortage of (fuel) will have a negative impact on the February GDP numbers, no question about it.”
As Truck News went to press, the Nanticoke refinery had been restored nearly to capacity and fuel prices across the GTA had eased slightly.
“Despite all efforts on our part, events of the past several weeks have put customers and associates in a very difficult position and we deeply regret this inconvenience,” Simon Smith, vice-president and general manager of fuels marketing with Imperial Oil apologized.