Gas over $1.00 at the pump this morning - oil companies rejoice!

Canadian oil industry executives must be doing cartwheels today as Ottawa residents wake up to $1.01/litre pricing at the pump for regular gas. What's the cause for celebration? They have managed to capitalize (in Ontario) on a fire at a southern Ontario Imperial Oil refinery and create a province-wide fuel shortage. They must be trying to figure out how to leverage it and turn it into a nation-wide pricing crisis right at this very moment!

In spite of the fact that crude prices are relatively stable (around $62 a barrel, much lower than the $75+ high crude prices we saw when we last paid over a dollar a litre at the pump), prices are spiking at the retail level because of this fire.

If raw material costs are still low - the way world markets work the crude oil being turned into gasoline this week was likely produced weeks and/or months ago when crude prices were even lower - and world market conditions are relatively stable, is this "perfect storm" of a rail strike coupled with a fire at a refinery resulting in Petro Canada, Shell Oil and other companies padding their profits thanks to Imperial Oil?

Of course, oil company officials will claim that nothing untoward is going on, but when news of the fire hit the wire, we were told that refining capacity would be coming back on line by "mid next week". Then it was "some time the week after that". As of the middle of this week, we were told "some time mid-March". Huh? What will we be told next week?

I don't know if things are different in Ottawa as compared to the rest of the province, but I'd be surprised if the majority of gas stations were Esso-owned. There are three within a 5-6km radius of where I work but there are more Shell, Petro Canada and Sunoco stations in that same area. I can understand some of these stations temporarily running out of fuel when the "Esso across the street" is closed because I understand how many retailers operate - they base product orders on previous years' sales numbers. I cannot understand how their inventory stock all of a sudden would either appreciate in value by up to 20 percent virtually overnight or how their shipping costs would go up by astronomical numbers to justify the hike of pump prices.

Gas is currently selling for about 90.4 cents per litre in Winnipeg, 85.5 cents per litre in Calgary, 90.4 or 93.0 cents per litre in Fredericton. It's selling for $2.45 a gallon in Syracuse at this moment. Oh - could anyone explain why it's still selling for 95 cents per litre in Prescott right now? Why did their prices not go up overnight like they did in Ottawa?

The bottom line? Many parts of the country are chugging along just as they did two weeks ago. I am familiar with the concept of supply and demand but common sense dictates that if a competitor is failing to provide service as expected, another will and should try to step in and capitalize on that. Increased sales volumes would increase the profits of that intrepid competitor. But increasing prices at the same time should be viewed as nothing more than price gouging. There would be overtime costs associated with getting more Shell gas to Shell stations, but not to the point that product prices need to be raised by 10-20 percent. Again, remember, raw material prices have not increased.

So what's going on? Time will tell... or will it? We've never been able to figure out how these corporations work. In the meantime, life goes on - we still need to drive and we'll keep buying gas. I guess they have us where they want us, whether we like it or not.