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Gas pains and smoking barrels

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A few years ago I did some travelling in Southern Europe, enjoying the sandy beaches and the warmth of the Mediterranean. It was off season, which meant a lot of resorts were ghost towns, but everything that was open and for sale was probably one third of the regular price.

While my friend and I were on a strict budget of six beers, two meals and one ass ride per day, the low prices meant we could afford to have a little more fun with our leftover Drachmas and Liras. Since our mission was to find the best frisbee beach in all of the Mediterranean, we rented scooters and a van to cover more ground. The van cost us about U.S. $100 for an entire week. The gas probably cost us twice that.

After doing some rough calculations, we determined that the price of gas on the island of Crete – literally a day’s boat ride from the oil fields of the Middle East – was about $1.30 Canadian a litre.

I coughed. Then I coughed up. I figured that was probably the most I would ever spend on gas. Besides, I was on vacation – I wasn’t going to waste my time or the sunshine bitching about the price of gas. So we’d drink fewer Heinekin’s that day. Big deal.

The vacation’s been over for a long time now, but it may finally be catching up with me. There are rumours – and these are documented rumours – that the price of regular unleaded gas could go up to 90 cents per litre this summer. Maybe even as high as a dollar.

One industry analyst even accused the petroleum industry of spreading rumours that gas prices were going to climb as high as a dollar in order to soften the blow when prices climbed as high as 90 cents.

Gas prices are already at an all-time high in Canada, hovering between 75 cents and 81 cents a litre from coast to coast. News stations camped out at gas stations after every increase to capture the grumblings of Canadians. People grumbled about high taxes and greedy corporations. People threatened to sell their cars, or at least to drive something smaller.

In the end, though, it seems that Canadians have accepted it with the same gritted teeth and cold stoicism that won us the day at Vimy Ridge and Passendale back in the Big One.

I don’t own a car, but that doesn’t lessen my outrage or my suspicion that record prices mean record profits for petroleum companies, and that the global economic system clearly isn’t working for the average working person.

While between one-third and one-half of the price of gas is tax no matter where you go, whether it’s Greece or Texas, the margin of profit must be enormous.

It costs about $8 to process one barrel of oil from the Alberta oil sands, which are said to contain as much crude as the entire Middle East. That’s more than it costs to pump oil out of wells, but judging by the size of the man-made grand canyon outside of Fort McMurray, it’s still well worth the effort.

One barrel of oil equals about 42 gallons or 159 litres. That means one litre of oil can be produced for slightly over a nickel.

The price goes up considerably when you add in the cost of refining and transporting that oil, and at each stage of the process there has to be a markup. There is also the corporation to finance, including the cost of exploration, research and development, and an incredible infrastructure of pipelines and tanks that spans the continent. But to go from five cents a litre to approximately 45 cents a litre before taxes is an extraordinary jump.

The world economy is more complex than I could hope to explain in a single column, but let’s just say the usual suspects of supply and demand, mixed in with a little bit of politics and speculation, is responsible for the price jump.

Canada produces about 2 million barrels of oil every day, 1.7 million of which are exported to the U.S. We don’t import as much as we used to, but we still buy oil and gas from OPEC (Organization of Petroleum Exporting Countries) members.

While we could meet our own oil and gas needs, we don’t because we’re woven into a global trading network that doesn’t recognize borders. We can’t complain, either, because Canada is currently profiting from the arrangement as it stands.

When the price of gas climbs – and there’s no guarantees it will go either way – I hope people learn a lesson: if you can’t win the game, it’s time to stop playing. Sell the SUV, but a gasoline/electric hybrid car, and drive as little as possible.

If we reduce the demand as much as we can, the supply won’t cost so much.

By the way, the best frisbee beaches we found on Crete were at Kommos and Paleohora.

— Andrew Mitchell

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