Running on E: Industry reflects on Ontario fuel capacity
Posted: August 1, 2014
TORONTO — Unlike trucking, fuel refining is not a portable business. Truckers and other vehicle operators in Ontario found that out the hard way several weeks ago when a fire at Imperial Oil’s Nanticoke, Ont. petroleum refinery exposed a growing fuel supply shortage.
Refining capacity was already tight when an Imperial Oil fire dried up supply. What about next time?
When the dust settled, there would be calls from truckers and road users for regulatory intervention, price controls, refining capacity contingencies, and other industry reforms. Which of those demands government or industry will take seriously has yet to be seen.
With refining capacity significantly reduced almost overnight by the fire, truckers woke up to find some cardlock outlets and service stations had run dry.
After regulators relaxed hours-of-service rules for fuel haulers, the Ontario Trucking Association pushed hard for Ottawa to allow available non-ULSD, off-road fuel to be diverted to on-highway. Despite the plan being backed by the province, the Feds — confined to a “regulatory straightjacket,” as OTA President David Bradley described the situation — did not heed the call since the Canadian Environmental Protection Act does not allow for any emergency suspension of its regulations.
Should it have? Of course, says Ron Rosnak, senior petroleum adviser for En-Pro International, an Oshawa, Ont., consulting and pricing firm of industrial commodities. But writing a provision into the law today might prove to be irrelevant in a few years when new smog-free engines, which require only ULSD, will have penetrated the market.
While he admits it would help to have more refining redundancy, Rosnak, like Bradley, wonders whether the oil companies are up to it.
Canada needs a watchdog to monitor inventory levels and problems at refineries and pipelines says industry expert.
The crackspread — the difference between the rack-wholesale price and the price of crude (and where oil companies’ profit margins lie) — is at all time high, explains Rosnak. “So do they get on the bandwagon and build a refinery or do they say to themselves ‘what happens if there are too many refineries? We’re enjoying a crackspread we haven’t seen before.'”
Although much of the media blamed the Nanticoke blaze for the shortage, that incident only punctuated a series of events that slowly pinched supply over the last year. It began with a fire at Petro-Canada’s Oakville, Ont. plant in early 2006, followed by a fire at Shell’s Sarnia refinery in December.
Capacity was already tight when the St. Lawrence Seaway closed for the winter. Then CN Rail was crippled by a strike.
Rosnak thinks truckers would be better served by laws similar to those in the U.S., which require immediate reports from suppliers if there’s a problem with refining and pipeline capacity or distribution.
A government watchdog organization like the Energy Information Administration, which monitors inventory levels in various regions, might also be in order.
“There’s no such thing in Canada,” he says. “It would give us a head’s up if there’s a potential supply issue coming down.”
Whether it’s additional refineries, petroleum stockpiles, or better contingency plans, Bradley says the problem needs fixing now. If anything, the recent disruption should have convinced decision-makers that the petroleum supply needs to be treated as a national security issue.
“With all the backroom planning that’s been going on since 9-11, here’s a isolated test and we failed miserably,” he says. “One really worries what would happen in this country were we faced with an (even bigger) national crisis.”