Experts say low diesel supply means Canadians are 'going to pay'
Economists and petroleum watchers are warning even more massive diesel price jumps are on the way, and they'll impact everyone in Canada -- regardless of what you fuel up with.
Diminishing fuel supply has been an issue throughout 2022. That problem could be even more pronounced as the temperature drops.
"The fact of the matter is demand is very strong and supply just isn't there," petroleum analyst Dan McTeague said. "So we are at all-time-high prices, and we're going to go much higher."
The problem is currently the most pronounced in the northeastern United States.
An update from the U.S. Energy Information Administration last month showed that during the week of Oct. 21, 2022, the U.S. had 25.9 days' worth of supply of total distillate.
DOWN THE LINE
Experts predict impact will echo across the continent and touch every pocketbook.
It's a hard lesson Canadians learned during the pandemic, as supply chain problems caused disruptions everywhere in the country.
"Diesel is the global economic workhorse. Without it, our economies would come to a screeching standstill. Whether it's mining, agriculture, transportation -- by plane, rail or by truck -- it's even used for fertilizer.
"Its importance is ubiquitous and unquestionable."
Sprott School of Business Associate Professor of Strategy Ian Lee agrees.
"This is inflationary and we're going to pay with higher prices at the retail level," he told CTV News.
Several factors are contributing to the issue.
Demand is usually higher in the winter months as heating systems are fired up, and European energy issues have led to increased need and higher premiums being paid overseas.
But many believe the real problem lies in limited refinery capacity.
Lee says federal policy is to blame.
"As older, more inefficient refineries were closed, new refineries are not being brought on," he said. "Investors in the industry are reluctant to invest given the government very publicly telling everyone that the days of oil and gas are numbered."
Two major refineries were recently taken offline -- one near Philadelphia and another in Newfoundland.
"There has been a move to discourage investment in refineries, such that many are either shuttering, or simply not making those investments," McTeague said.
"But policies that inhibit the building of new refineries does not make the underlying need for diesel go away," Lee added.
TAPPING THE BRAKES
Truck drivers have no doubt noticed the change.
And with more increases on the way -- some believe prices could jump by 30 cents a litre this winter -- it's a tough time to be in the industry.
"As an owner operator, it's becoming untenable," Bob Francis told CTV News. "You get paid per mile for everything you do, and when you sign a contract to take that load, the cost of diesel from where you start to where you finish could practically double.
"There's nothing you can do about it."
Francis, who mainly drives furniture across Canada and the United States, says the high prices to fill up have forced him to rethink certain routes.
"It really makes no sense for me to (get) a job in B.C. or California," he said.
The cold Canadian weather has amplified the problem, and we can expect it will continue to throughout the winter.
But some are skeptical the market can correct the diesel shortages any time soon.
Lee predicts it may result in a rethink of certain policies in Ottawa.
"It's going to force a realization by the Government of Canada that just because you announced decarbonization doesn't mean it's going to happen by the snap of our fingers," he said. "Businesses have to continue to function, consumers still have to go to the grocery store."
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