# Price of Gas



## sags (May 15, 2010)

Gas prices are soaring.

I am glad the salesman talked me out of buying an SUV a couple weeks ago, and into buying a more fuel efficient Chevy Cruz.

I was surprised to learn Canada isn't self sufficient in gas........while the US is.........and their price hasn't budged.

_“Canadians are no longer price makers when it comes to gasoline, we are price takers,” said gas expert Dan McTeague, who pointed out the price of gas in the U.S hasn’t budged in the past week.

“We don’t produce enough to meet our own domestic demands and rely more and more on outside sources, so problems in Iraq and Ukraine will affect our prices here,” he said._

http://www.torontosun.com/2014/06/15/gas-price-reaches-all-time-high-in-gta

Rising gas prices could put a serious crimp on consumer spending. 

The last recession was preceded by high gas prices and some believe it was one contributing factor to it.

We will see how stock markets hold up. Retail might not be the best place to be in the near future.


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## SkyFall (Jun 19, 2012)

I must fill up with 91 octane.... it's a pain in the b*tt everytime but at least I have fun with my car.... I will try to make more money to buy a Tesla  hahahahahha

Last time I went to the US I was filling up there at $0.89/L compare to our $1.39/L...... man I was happy back there hahahha

Also I am so unhappy about the fact that we aren't self sufficient in gas!


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## daddybigbucks (Jan 30, 2011)

i personally wish gas would spike up to $5 a litre.
The effect of that would be the same we are trying to do now. People would drive less and exercise more. More carpooling,and smaller vehicles.


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## Eclectic12 (Oct 20, 2010)

sags said:


> ... _“Canadians are no longer price makers when it comes to gasoline, we are price takers,” said gas expert Dan McTeague, who pointed out the price of gas in the U.S hasn’t budged in the past week. _


_
The NEP was the closest I can recall to Canadians being price makers ... and that went over like a lead balloon as the West wanted the maximum profits of selling to the highest bidder.




sags said:



...“We don’t produce enough to meet our own domestic demands and rely more and more on outside sources, so problems in Iraq and Ukraine will affect our prices here,” he said.

Click to expand...

_I will have to do some research as not being able to met our domestic needs - I doubt is a resource issue. 
I suspect it has more to do with what refineries are operating as well as what is being shipped overseas.


Bear in mind that while buying cheap "US" gas at a station in Buffalo NY, I have a chance to chat with the driver of the tanker refilling the station's tanks. The tanker of gas came from an Ontario refinery and he said this was his regular route (i.e. not a one of trip).


Cheers

*PS*

This ignores that the US built a pipeline from Illinois to Oklahoma to pump "even more Canadian crude".

Or more interestingly, the "first known cargo of Canadian crude re-exported via the U.S. Gulf sailed for Spain a month ago out of the Freeport, Texas ... "

http://www.reuters.com/article/2014...-up-seawaytwin-analysis-idUSKBN0ER1HG20140616


Bottom line is that while those being quoted like to keep it simple, the oil/gas industry is far from simple.


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## cainvest (May 1, 2013)

daddybigbucks said:


> People would drive less and exercise more. More carpooling,and smaller vehicles.


Don't see that happening, well, to any large extent .... many people don't seem to care about the price of gas.

Gas price doesn't really matter to me, I drive a very fuel efficient diesel car.


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## NorthKC (Apr 1, 2013)

daddybigbucks said:


> i personally wish gas would spike up to $5 a litre.
> The effect of that would be the same we are trying to do now. People would drive less and exercise more. More carpooling,and smaller vehicles.


Then, get ready for a big hike in your food costs because of the higher transportation cost!


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## daddybigbucks (Jan 30, 2011)

NorthKC said:


> Then, get ready for a big hike in your food costs because of the higher transportation cost!


that is correct. Then people start buying locally grown foods because it is cheaper.
Also plastic junk brought over from china becomes more expensive so domestic products become more desirable.


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## Eclectic12 (Oct 20, 2010)

cainvest said:


> Don't see that happening, well, to any large extent .... many people don't seem to care about the price of gas...


+1 ... it amused me to hear the people in line at StarBucks complain about the price of gas while happily shelling out a lot more for a fancy coffee.


Cheers


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## hystat (Jun 18, 2010)

daddybigbucks said:


> Also plastic junk brought over from china becomes more expensive so domestic products become more desirable.


is transportation cost an issue in that realm? In the last doubling of fuel prices, I saw no decline in the amount of that stuff lining the shelves of Chinese Tire or WalMart. And the prices of offshore stuff never seems to rise much.

Fuel cost only seems to affect domestic goods. Look at the price of a loaf of bread... holy schmolly.


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## Beaver101 (Nov 14, 2011)

hystat said:


> is transportation cost an issue in that realm?* In the last doubling of fuel prices, I saw no decline in the amount of that stuff lining the shelves of Chinese Tire or WalMart. And the prices of offshore stuff never seems to rise much.*
> 
> *Fuel cost only seems to affect domestic goods*. *Look at the price of a loaf of bread... holy schmolly *.


 ... +1 and that loaf of bread is locally-made if not grown.


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## NorthKC (Apr 1, 2013)

daddybigbucks said:


> that is correct. Then people start buying locally grown foods because it is cheaper.
> Also plastic junk brought over from china becomes more expensive so domestic products become more desirable.


What about food in the winter? Where are you going to get your apples, grain, peppers, etc? From the greenhouse in the middle of nowhere? How will they get there?


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## Sustainable PF (Nov 5, 2010)

NorthKC said:


> What about food in the winter? Where are you going to get your apples, grain, peppers, etc? From the greenhouse in the middle of nowhere? How will they get there?


It wasn't that long ago, in the grand scheme of human history, where many food items were a luxury due to the fact they do not grow in Canada. An orange was a treat for my grandfather when he grew up - something his folks would splurge at Christmas to provide to their family.

Grain and apples? It's called storage, cold or otherwise. Peppers? Not a need and not meant to be around these parts come winter.


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## KaeJS (Sep 28, 2010)

Gas prices are a huge concern for me.

I spend 18% of my income on gasoline. Ridiculous.


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## Ihatetaxes (May 5, 2010)

KaeJS said:


> Gas prices are a huge concern for me.
> 
> I spend 18% of my income on gasoline. Ridiculous.


Trade the convertible in on a Golf TDI. 18% now becomes 5-6%.

5L/100km and 1,100 km per tank. Commuting dream.


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## KaeJS (Sep 28, 2010)

Ihatetaxes said:


> Trade the convertible in on a Golf TDI. 18% now becomes 5-6%.


Better yet -

I just need to increase my income.


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## Ihatetaxes (May 5, 2010)

KaeJS said:


> Better yet -
> 
> I just need to increase my income.


Yeah but you will need a few years for that. I spent $1,900 on gas in 2013 which is less than 2 days of income. Even so I don't like spending $135 to fill my tank. Thinking seriously about a hybrid in 2015 or maybe an electric if they extend the green license plate HOV plan.


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## nobleea (Oct 11, 2013)

Canada needs more refineries, but some people don't like that idea. Plus they're very expensive. And there are many, perfectly good refineries on the gulf coast that are underutilized. And they can pay more for feedstock and still turn a profit if the capital expense has been paid for a long time ago.

We live very close to our respective works. Our total commute time every day (there and back for both) is about 50mins.

They can grow food in winter climates quite a bit. They've had locally grown cucumbers available in the supermarkets here all year round. In Edmonton. Tomatoes are greenhouse grown as well. I've always thought with all the waste heat generated in the area by powerplants, refineries, and factories, we could have a hell of a greenhouse system. We were eating tomatoes from our garden will in to Dec. Apples even later. Potatoes and onions can keep even later than that. The 'cold storage room' is a long forgotten concept.


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## andrewf (Mar 1, 2010)

Not sure why people are opposed to transporting food long distances. It is not always lower environmental impact/carbon to grow food local vs imports.

And it's not a sin to eat strawberries in February. If we can create a process for making that economical and environmentally sound, that would be a good thing. Not sure we should be looking for energy prices to rise solely to punish the sinners who eat strawberries rather than god's intended wintertime produce.


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## m3s (Apr 3, 2010)

When gas prices go up, my additional expense is more than covered by the capital gains. If I rebalanced now my gas would be paid for years.

Gas in Europe costs double. I wouldn't mind paying the same in Canada especially if it meant better roads and less fools on the road.


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## Eclectic12 (Oct 20, 2010)

nobleea said:


> Canada needs more refineries, but some people don't like that idea.


Does Canada? 
We already have nineteen of them. 

I suspect the bigger problem is who owns the business and is making the decisions.
Oil company execs claim it's more cost effective to ship the crude to the US and buy back the refined gas. Others claim it's too late in the game.

Probably more relevant to the price of gas - there's basically no competition at the gas station level so that the oil companies can dictate the price.





nobleea said:


> .... Plus they're very expensive. And there are many, perfectly good refineries on the gulf coast that are underutilized...


 ... which plays into the "it's more cost effective" statements.


BTW - I was interested to read that *North America's newest* major refinery in thirty years is being built in Alberta.
The US hasn't been building new facilities either.
http://www.theglobeandmail.com/repo...ery-in-decades-breaks-ground/article14426102/


Cheers


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## doctrine (Sep 30, 2011)

For those wondering about Cdn-US gas independence and pricing concerns, remember to look at the underlying price. Canadian taxes account for 31% of Canadian gasoline prices, on average. In the US, it's 12%.


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## AltaRed (Jun 8, 2009)

Eclectic12 said:


> Probably more relevant to the price of gas - there's basically no competition at the gas station level so that the oil companies can dictate the price.


Most (at least many) gas stations are owned by independent operators who have supply contracts with specific oil companys' refineries. Station operators set their own prices, but the truth of the matter is these operators make more money from their convenience store than from gasoline. Their pump margins are razor thin.


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## indexxx (Oct 31, 2011)

I was just thinking today (as I drove past $1.49.9 gas here in Vancouver) that the year I got my driver's license was, if I remember, the same year gas switched over to litres- and it was 17 cents/litre. That was Edmonton over 30 years ago.


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## pwm (Jan 19, 2012)

I never pay the slightest attention to the price at the pump. Interesting fact: when I bought my first car *gas was 38 cents an imperial gallon*, and I got change back from $3.00 after filling an empty tank on my Toyota. That was in 1970 and my annual salary was just under $4,000. I'm retired and I put 1,500 km on my car last year and my after tax income is around $85k, so as you can see the current price is irrelevant to me.


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## pwm (Jan 19, 2012)

Math quiz: What does 38 cents/imperial gallon work out to in litres?


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## carverman (Nov 8, 2010)

pwm said:


> Math quiz: What does 38 cents/imperial gallon work out to in litres?


<carver's hand goes up!>...oh! oh!..I know!, I know!..hmmm?..is this a trick question?..lets see using the "new math" its ..10c a litre.
Using the "old math"..(like they USED to teach in Ontario) it's 8.37c a litre....teacher..may I be excused to leave the room? 
All this math is giving me a headache...need to see the school nurse.


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## carverman (Nov 8, 2010)

pwm said:


> I never pay the slightest attention to the price at the pump. Interesting fact: when I bought my first car *gas was 38 cents an imperial gallon*, and I got change back from $3.00 after filling an empty tank on my Toyota. That was in 1970 and my annual salary was just under $4,000. I'm retired and I put 1,500 km on my car last year and my after tax income is around $85k, so as you can see the current price is irrelevant to me.


I remember McD's TV ads back in the 70s, where they show a customer going into a McD's, ordering a burger and a drink, plopping down a dollar (a real one made of paper),
and exclaiming "Hey! At McD's you can get change back from your dollar too!...and showing the nickel he's pocketing. 

Not sure if the tax was included..if I remember the PST was only 3% at the time.


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## Eclectic12 (Oct 20, 2010)

AltaRed said:


> Most (at least many) gas stations are owned by independent operators who have supply contracts with specific oil companys' refineries. Station operators set their own prices, ...


Within what the oil company can influence or allow ... yes.

The Coop in town years ago advertised an opening one day special on gas for months before their opening day. They got a call the day of saying their price was too low. They refused but then within a year took their pumps out as they were having "supply problems" that none of the other gas stations in town were having.


At the same time, retailers themselves have been known to fix prices.
http://www.ctvnews.ca/quebec-gas-companies-charged-with-price-fixing-1.301955




AltaRed said:


> ... but the truth of the matter is these operators make more money from their convenience store than from gasoline. Their pump margins are razor thin.


It's a volume business these days with any alternate sources with a higher markup (can you say Tim Horton's?) helping out.


Cheers


*PS*

I do find it interesting that the most cost effective setup is to pipe Alberta crude to the US as it's "too expensive" to ship it east - yet the oil producers in the east are shipping to the rest of the world. At the same time, the east is importing oil from Venezuela and other countries.

Meanwhile, some of that Alberta crude is being loaded on ships to be sent to Spain.


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## MrMatt (Dec 21, 2011)

carverman said:


> <carver's hand goes up!>...oh! oh!..I know!, I know!..hmmm?..is this a trick question?..lets see using the "new math" its ..10c a litre.
> Using the "old math"..(like they USED to teach in Ontario) it's 8.37c a litre....teacher..may I be excused to leave the room?
> All this math is giving me a headache...need to see the school nurse.


it's $0.0836 no matter what "math" you use.
The imperial (UK) gallon, now defined as exactly 4.54609 litres
The US gallon, which is equal to exactly 3.785411784 litres

Throw in a dry gallon (which isn't the same) and you wonder why people get confused.


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## sags (May 15, 2010)

carverman said:


> I remember McD's TV ads back in the 70s, where they show a customer going into a McD's, ordering a burger and a drink, plopping down a dollar (a real one made of paper),
> and exclaiming "Hey! At McD's you can get change back from your dollar too!...and showing the nickel he's pocketing.
> 
> Not sure if the tax was included..if I remember the PST was only 3% at the time.


In London here.........the first fast food burger joint I remember was the Red Barn.

You got 5 burgers for a dollar. We got two shopping bags full of food for a dollar..........because our buddies all worked there........LOL.


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## sags (May 15, 2010)

I suspect it won't be long and a politician will muddle by and promise a full scale "inquiry" into gas prices.

Like insurance rates and hydro.............promising to look into gas prices is a "go to" issue for politicians who want some attention.

Nothing ever changes though.


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## HaroldCrump (Jun 10, 2009)

sags said:


> Nothing ever changes though.


Well, keep voting for change :biggrin:


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## Eclectic12 (Oct 20, 2010)

sags said:


> I suspect it won't be long and a politician will muddle by and promise a full scale "inquiry" into gas prices...


Dan McTeague chaired the Liberal committee on Gasoline Pricing ... but he's since retired from being an MP.

http://tomorrowsgaspricetoday.com/dan-mcteague



Cheers


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## james4beach (Nov 15, 2012)

Gasoline prices are incredibly low in both Canada and the USA. Our society could probably easily tolerate double or triple these prices before anyone really starts getting upset.

Been to Europe or the Caribbean?


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## Nemo2 (Mar 1, 2012)

^ Perhaps not, when one considers the comparative distances, vis-a-vis Canada/US and Europe/Caribbean.


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## fraser (May 15, 2010)

Just filled up in Edmonton today. 115.9 for regular.

I suspect that gas prices will have to go a little higher before we see a reduction in the number of gas guzzling 4 X 4's that are on the road. There does not appear to be a ceiling on how high gas prices can go before impacting our choices of vehicles.


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## AltaRed (Jun 8, 2009)

Eclectic12 said:


> I do find it interesting that the most cost effective setup is to pipe Alberta crude to the US as it's "too expensive" to ship it east - yet the oil producers in the east are shipping to the rest of the world. At the same time, the east is importing oil from Venezuela and other countries.
> 
> Meanwhile, some of that Alberta crude is being loaded on ships to be sent to Spain.


All of that makes sense. Pipelines to the US Midwest are much shorter than they would be shipping to Montreal or Halifax... and also shorter to the Gulf Coast than to Montreal or Halifax. Also, these US Midwest and Gulf Coast refineries are configured mostly for heavy crude from Alberta. Meanwhile, crude produced off the East Coast primarily goes to eastern seaboard refineries, and to Montreal. Some might go to Europe but only if the Brent/WTI differential is sufficient to cover tanker costs to get it to Europe. Venezuelan light crude would end up in eastern seaboard refineries, but Venezuelan Orinoco heavy would end up in US Gulf Coast refineries. I suspect Alberta light crude going to Spain is only a result of US Gulf Coast refineries not wanting it and there is no pipeline alternative to send it to eastern seaboard refineries. 

All crude has a reason to move to the markets it does. Its about crude specification, refinery configurations, competitive alternatives, and pipeline accessibility. Rail, of course, will provide more options as we have seen with Bakken crude moving eastward...remember Magantic in Quebec?


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## Eclectic12 (Oct 20, 2010)

^^^

On one side the oil company execs are saying that sending the crude out of country for refining is cheaper. 

On the other side, the article quoted claims that Canada is not refining enough domestically so that it has to be import gas from other sources which is making our prices react to unrest in countries that could affect supply.

Somehow I have trouble reconciling these two ideas ... concerns about supply from foreign countries seem to point to selling to the top bidder.


As for the East Coast oil, the CBC disagrees:


> ... Eastern Canada relies on imported oil — despite the fact that some provinces are oil producers.
> There are several offshore drilling operations in Newfoundland and Labrador, but *none of the oil is actually used in Canada.*
> The eastern provinces rely on an oil supply that's imported from Saudi Arabia, Africa and Venezuela.


http://www.cbc.ca/news/politics/canada-imports-oil-while-battling-over-pipeline-exports-1.1137804


The G&M says:


> ... Eastern refineries have been struggling, as they rely on expensive crude imported from overseas.


It also warns that despite plans to improve the ability to deliver Alberta oil to the east might not have the benefit to the consumer that one would expect as the oil producers are looking at a different goal.



> ... Accessing the port at Saint John would enable them to ship their oil, perhaps unprocessed bitumen from the oil sands, to lucrative overseas markets by tanker.
> 
> Brian Ferguson, CEO of oil company Cenovus, was frank about his company’s preference in a February interview, saying it was the export option that was most enticing about TransCanada’s proposal.


http://www.theglobeandmail.com/repo...es-at-the-pump-for-canadians/article11429689/

Cheers


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## indexxx (Oct 31, 2011)

james4beach said:


> Gasoline prices are incredibly low in both Canada and the USA. Our society could probably easily tolerate double or triple these prices before anyone really starts getting upset.
> 
> Been to Europe or the Caribbean?


When I lived in the Caymans gas was something like $6.00 CI a gallon- that's $7.50 US- and that was over 5 years ago.


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## m3s (Apr 3, 2010)

Eclectic12 said:


> Somehow I have trouble reconciling these two ideas ... concerns about supply from foreign countries seem to point to selling to the top bidder.
> 
> As for the East Coast oil, the CBC disagrees:
> 
> ...



The Irving conglomerates have several what I call "vertical monopolies" in the East coast. They keep most of their business within the hundreds of family owned subsidiaries, and they deal off shore to "minimize" their taxes. With so much control in the East coast, they can keep wages dirt low as well. You won't hear about it because they own nearly all the media, and they have the provincial government wrapped around their finger. They had plans to build a 2nd oil refinery in St John but it was cancelled. This affected the local economy like a pump and dump scheme. I've heard stories of how they bought out suppliers with similar tactics over the years. They have mastered capitalism.

Now let's look across the Atlantic ocean. Norway has off shore drilling operations as well. Their government collects royalties on the oil and then invests it around the world for diversification. The government can spend something like 4% of it in Norway each year, which is now the largest sovereign wealth fund in the world. Alberta by contrast has little to no taxes, blows all their money as soon as they can, and then goes in billions of debt as soon as oil prices drop or a flood hits.. Sure Albertans are having a drunken party today, but Norwegians take home even more of their economic wealth and it's stable.. As for the East coasters.. they don't even know what hit them.


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## MrMatt (Dec 21, 2011)

Canadians don't want an oil industry in Canada.
So they block pipelines and overregulate the rest of the industry, which drives up cost. Then they wonder why gas is so expensive, and why it's cheaper to do business outside the country.

Give approvals to build a few pipelines and open up a refinery and they'll get built.
Stall them with decades of red tape, and most politicians promising to block or cancel approvals and don't be surprised when prices go up.

Oh, and add on more gas taxes, that always helps.


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## HaroldCrump (Jun 10, 2009)

MrMatt said:


> Canadians don't want an oil industry in Canada.
> Oh, and add on more gas taxes, that always helps.


Yup, well said :biggrin:

We want the tax revenues & royalties that the O&G sector can generate, but we don't want the underlying business.
Provincial & federal governments have adapted their spending habits to the billions of $$ generated by O&G royalties (and all derivative tax income such as higher income taxes).
But they have forgotten where that money is coming from.


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## carverman (Nov 8, 2010)

MrMatt said:


> Stall them with decades of red tape, and most politicians promising to block or cancel approvals and don't be surprised when prices go up.
> Oh, and *add on more gas taxes, that always helps.*


also this..
http://www.eia.gov/forecasts/aeo/er/early_prices.cfm


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## Eclectic12 (Oct 20, 2010)

m3s said:


> The Irving conglomerates have several what I call "vertical monopolies" in the East coast...
> You won't hear about it because they own nearly all the media, and they have the provincial government wrapped around their finger.


They haven't been 100% successful as I've read a rare article here & there about their monopoly/business practices. 
Those from the East Coast that I've chatted with have far more to say, in far more detail ... :biggrin:




m3s said:


> ... Now let's look across the Atlantic ocean. Norway has off shore drilling operations as well.


 ... which in 2008/2009, was the country Canada imported the second largest amount of oil from.




m3s said:


> ... Their government collects royalties on the oil and then invests it around the world for diversification...
> Sure Albertans are having a drunken party today, but Norwegians take home even more of their economic wealth and it's stable...


Yes ... lots of long term thinking and concern for the future. 




m3s said:


> ... As for the East coasters.. they don't even know what hit them.


Some seem sure that their local monopolies influenced PetroCanada & politicians to ensure the buys of the Come By Chance, Newfoundland refinery would not be allowed to sell their product to NS, NB, PEI, Ontario & Quebec.

Supposedly the lifting of this restriction in 2001 was to be good for Newfoundland as well as result sales to domestic customers.
Yet the refinery is currently owned by a Korean company, where it appears that pretty much all of the product is going to the US or overseas.


Cheers


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## Eclectic12 (Oct 20, 2010)

MrMatt said:


> Canadians don't want an oil industry in Canada.
> So they block pipelines and overregulate the rest of the industry, which drives up cost. Then they wonder why gas is so expensive, and why it's cheaper to do business outside the country.
> 
> Give approvals to build a few pipelines and open up a refinery and they'll get built.


 ... I'm not sure that squares up all that well with the first major refinery in thirty years for North America being built in Alberta (i.e. the US hasn't been building new refineries either).
But I do get the point.


Of course the current schemes involve re-using under used Natural Gas pipelines or reversing the flow of already existing pipelines to get oil East without much new construction. The analysts point out that it's not likely to help the consumer a lot as the prize is loading tankers in the port of Saint John for shipment elsewhere, at better prices.


Cheers


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## AltaRed (Jun 8, 2009)

Eclectic12 said:


> ^^^
> 
> On one side the oil company execs are saying that sending the crude out of country for refining is cheaper.
> 
> ...


Beware lazy reporting and especially from the CBC. It is cheaper to move crude (or gasoline) north/south in big pipelines rather than east/west. US refineries are huge compared to Canadian equivalents and thus more efficient. For example, it is cheaper to refine Canadian crude from Alberta in huge Chicago refineries and ship refined products like gasoline and jet fuel to Toronto than it is to refine Alberta crude in Sarnia and ship gasoline to Toronto (though that does happen - just there are no economics in expanding Ontario refineries to meet all of Eastern Canada's demand). Oil is always sold to the highest bidder...which reflects efficiencies in the pipeline, refining and distribution systems. Writers of articles do not understand how the oil market works and it is clear CBC is way outside its expertise. 




> As for the East Coast oil, the CBC disagrees:


Again, the CBC does not understand the oil market. Suncor might move its share of East Coast crude to Montreal, but only if the Montreal refinery is configured to refine East Coast crude efficiently. Crude compositions vary a lot and the number and type of process units in a refinery vary a lot. If Montreal cannot process East Coast crude at a competitive price, it is then cheaper to sell Hibernia/TerraNova/Hebron crude to rhe huge mid-Atlantic refineries such as those in New Jersey to refineries configured for that type of crude, and import the right composition of Saudi/Nigerian/Angolan/Equatorial Guinea crude to Montreal. Oil companies move the product to the right places for maximum margin. Same holds true for the Irving refinery in New Brunswick.




> The G&M says:
> 
> It also warns that despite plans to improve the ability to deliver Alberta oil to the east might not have the benefit to the consumer that one would expect as the oil producers are looking at a different goal.


Likely quite true (but for different reasons) and it has never been stated otherwise, except maybe by politicians and public relations folks. Oil is always sold to the highest bidder and if New Jersey refineries can pay more for Alberta crude than can Montreal, that is where it will go. Ontario refineries will always buy Western Canadian crude simply because that is the pipeline configurations and it is cheaper for them to do that than move oil from Texas or via St. Lawrence Seaway. But there is no economics in spending huge amounts of refinery capital to expand Montreal or Ontario refineries. There is a net surplus of refining capacity in North America ever since USA product demand (gasoline in particular) peaked circa 2007 and their huge refineries will beat the bejesus out of the smaller less efficient refineries.

Oil production companies sell their oil to refineries for the highest prices they can, and refineries purchase the right composition of crude for their refineries at the cheapest costs they can. It is an open market with most crude production owned by separate companies from those that own the refineries. Even for the integrated multi-nationals, Company A's crude may never be bought by Company A's refineries. They may pass by each other in the night for cost reasons.

Each refinery runs run very sophisticated linear programs to determine what types of crude are most efficiently refined in their refinery and purchase accordingly. They will blend various types of crudes to maximize the efficiency of their process units, and for the amount of demand (and price) of the products they can make. If the market for gasoline is higher (and pricier) than the market for jet fuel, that refinery will purchase the right types of crude (and blend these types accordingly) to optimize production of the right portions of gasoline and jet fuel. Refineries optimize to the tenth of a cent of gallon juggling all 3 balls at one time (crude composition and price, type and efficiency of their specific process units, and product demand portions and price).

Added Friday: http://www.canadianbusiness.com/economy/canada-buys-almost-all-american-oil/ is yet another twist on oil movements. The headline is stupid...sensationalism really, but it indicates why light crude moves to Central Canada and diluent moves to the oil sands.


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## RBull (Jan 20, 2013)

m3s said:


> The Irving conglomerates have several what I call "vertical monopolies" in the East coast. They keep most of their business within the hundreds of family owned subsidiaries, and they deal off shore to "minimize" their taxes. With so much control in the East coast, they can keep wages dirt low as well. You won't hear about it because they own nearly all the media, and they have the provincial government wrapped around their finger. They had plans to build a 2nd oil refinery in St John but it was cancelled. This affected the local economy like a pump and dump scheme. I've heard stories of how they bought out suppliers with similar tactics over the years. They have mastered capitalism.
> 
> Now let's look across the Atlantic ocean. Norway has off shore drilling operations as well. Their government collects royalties on the oil and then invests it around the world for diversification. The government can spend something like 4% of it in Norway each year, which is now the largest sovereign wealth fund in the world. Alberta by contrast has little to no taxes, blows all their money as soon as they can, and then goes in billions of debt as soon as oil prices drop or a flood hits.. Sure Albertans are having a drunken party today, but Norwegians take home even more of their economic wealth and it's stable.. As for the East coasters.. they don't even know what hit them.


I live on the East Coast and worked for the Irvings for a number of years. Not sure what you mean with your last statement but I'm generally no fan of Irving tactics and particularly governments approach to them.


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## alingva (Aug 17, 2013)

daddybigbucks said:


> i personally wish gas would spike up to $5 a litre.
> The effect of that would be the same we are trying to do now. People would drive less and exercise more. More carpooling,and smaller vehicles.


I like your logic but prices of everything would go up accordingly.


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## alingva (Aug 17, 2013)

In case you are looking the cheapest gas in the area - http://www.gasbuddy.com


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## gardner (Feb 13, 2014)

AltaRed said:


> Oil is always sold to the highest bidder...which reflects efficiencies in the pipeline, refining and distribution systems.


American crude can only be sold in the USA. If a Japanese buyer would pay more for WTI at Cushing, they still could not export the oil to Japan. This distorts the US market. The fact that Canadian oil is land-locked to the US market contributes to the effect of this distortion, causing the NA market to generally be oversupplied and making prices lower here than elsewhere. I am really looking forward to seeing Canadian crude going to market in the far east and reducing the amount flowing into the distorted NA market. Then we'll see what "highest bidder" really means.


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## AltaRed (Jun 8, 2009)

Not technically true. American crude is sold to Central/Eastern Canadian refineries under special dispensation. Remember Lac Megantic in Quebec? USA still imports about half of its crude requirements, and other than the Northern/Upper Mid-Continent of the USA being long in crude (from ND and Canadian supplies), there would otherwise no economic reason for ND crude to go to Eastern Canada. 

WTI has been lower priced than Brent, primarily due to bottlenecks out of Cushing (recently relieved with pipeline capacity to the Gulf Coast) and longer shipping lines to the northern European market (that market, e.g. Rotterdam, being farther away from supply options). I probably should have said "Oil is always sold to the highest bidder subject to pipeline constraints, refinery configurations and distribution networks". If there is money to be made exploiting differentials longer term, e.g. 15-25 years, it will be spent (the rationale for Keystone XL for example).


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## gardner (Feb 13, 2014)

In the news:
The Obama administration has quietly approved the first exports of American oil outside of North American since the 1970s
http://www.cbc.ca/news/business/u-s-to-allow-oil-exports-for-first-time-in-40-years-1.2687289

"U.S. oil producers such as Continental Resources Inc. and ConocoPhillips have been lobbying for an end to the restrictions on exports so they can sell their shale oil."


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## james4beach (Nov 15, 2012)

Whether they build pipeline X, or tax it, or whatever, the price is in a long-term uptrend... oil is a limited resource. It's not going to be any cheaper in 10 years so you just have to accept it.

If high fuel prices really concern you or cause big stress, then perhaps you should consider adjusting your lifestyle, such as where you live. I sold my car in 2009 and ever since then, I've lived closer to where I work. Toronto is where I first discovered that this can be a terrific idea

I still rent a car and drive occasionally, but it's very pleasant no longer having to deal with commuting and traffic.


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