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Volume Ten, Number Three   May 2005   www.columbiajournal.ca



Boycott Now! Boycott Who?

Bob Smith

A suggestion came to my email today that we boycott certain brands of gasoline until the oil companies reduce their retail prices.

Those who forwarded this letter around really do not understand how the petroleum industry works. In most areas of Canada there is only one refinery. This is true in Vancouver where Standard/Chevron has the only one still operating. Most gas retailers here get their gas from the Chevron refinery. The companies that don't have a refinery of their own just pay the companies who do with money at the end of the month. The companies who do own refineries elsewhere in Canada or elsewhere in the world trade that much product to Chevron in other cities where Chevron stations operate, but Chevron does not have a refinery, such as Prince George and Calgary.
 
Now that there are pipelines (also owned by the refinery owning oil companies) the situation becomes a little more complex. Petrocan and Shell in Vancouver, and in other places without a refinery, refine their product in huge refineries in Alberta. Shell's is in Sherwood Park, east of Edmonton. Petrocan's is North of Edmonton. They send the finished products down one pipeline to Vancouver or the other way to Winnipeg, Toronto and Montreal. (I only mention these because they were subject of the proposed boycott.) The product that comes out of the pipe in Vancouver and is sold in a Petrocan station may or may not ever have seen the inside of the Petrocan refinery. It may just as easily been refined in the Shell refinery or any one of several others near the source of the crude in Alberta. It may also contain some synthetic crude or some semi-finished synthetic product from the Syncrude, Imperial, Shell or other tar sands refiners. They all swap product as needed.
 
In Saskatchewan and Manitoba, for example there is only one refinery, owned by Federated Co-operatives. Every oil company in the area draws supply from it. Every retail gas outlet in Saskatchewan, regardless of the sign over its door, is selling gas from the Co-op refinery, not from their own refinery which is much too far away to economically deliver product to them when the Co-op refinery is hundreds of Kilometers closer.
 
On the other hand, Co-op stations in other provinces, like Ontario and BC do not sell gas from their parent company's refinery for the same reason-it is too far away. In Vancouver they draw supply from Chevron. In other provinces they draw from other refiners.
 
There is a common pipeline and everyone puts their product into the same pipe. Everyone takes product out of the same pipe at the end of the pipe. The oil companies know where the product came from but the receivers may not. They don't have to know. The products are all standardized. Only a miniscule amount of final additives is added, often as the truck is being filled at another refiner's fillstand.
 
The point is these companies are all in this together. They trade product so that everyone makes the most money. The products are totally interchangeable between retail brands and are as often as not refined by a different company than the name we see over the door.
 
To stop buying, for example, Shell, gas here means an increase in sales by some other retail brand. The Shell refinery will as likely as not already be the refiner for that brand. If not then the added volume will create a temporary imbalance in the system as local Shell stations pump less. This imbalance will be met by the Shell refinery diverting its excess production to fill the other brand's unexpected new volume. The same will be true for Petrocan or almost any other brand in the marketplace.
 
In Vancouver the only company which does not draw finished product from an Edmonton area refinery is Super Save which draws it from the excess supply at the Arco refinery in Cherry Point Washington. Even this is traded because an equal amount of non-Arco refined gas then flows to Arco stations which are closer to other refineries than they are to an Arco one. Incidenally Super Save gas meets the US standards for lead and sulphur content which are much tougher than Canada's. The same oil companies which meet these stringent US standards in the US say they are so far unable to meet them an Canada, They have been granted more time by our Federal Government.
 
To do as this oft-forwarded email suggests is futile. It doesn't solve the problem-Monopoly Capitalism, and it would be totally ineffective in the integrated marketplace we have in petroleum where product is traded worldwide by gigantic integrated and interlinked oil companies. This requires the attention of not only national governments but also international agreements to resolve. Don't hold your breath for it.
 
The writer's other thesis that there is no shortage of oil is also incorrect. The world is fast appproaching the point at which demand from China and India particularly, and the world's insatiable demand for plastics, will push the whole world to exceed the available supply that can possibly be pumped out of the ground. Political evidence of this can easily be seen in the desperately high price the oil-starved US and Britain are happily willing to pay to try to control the oil in the Middle East, especially in Iraq. Oil-rich Iran may be the next place that Bush invades. He is already trying to achieve "regime change" in Venezuela, Libya and  Syria. Iraq alone costs the US around $80 Billion  a year to control. An enormous sum but much less than the value of the oil used in the US annually. Much less than the oil to be used in the next decades, especially if the price keeps rising.
 
China and India are now rich enough and growing fast enough to afford to buy all the oil they need for their combined population of 2.2 Billion people. Can you imagine the amount of oil they will need if they become even half as oil guzzling as the people in the US and Canada? There are almost nine times as many people in India plus China as there are in the US. Auto use in both countries is exploding. China expects to make more cars this year than all of Europe; to add more cars to its roads this year than all the cars in Canada. Next year it will increase those numbers by 40%. India is less than a decade behind in terms of oil consumption per capita but, unlike China, has no reasonably recoverable oil of its own. Both countries are signing agreements all over the world for new oil to import.
 
The amount of oil that the entire Alaskan North Slope Oilfield will produce if sucked completely dry will only last the US a few days over fifteen months. Canada is now the largest oil supplier to the US. We are bigger than Nigeria, Venezuela, Arabia, Iraq, Syria, Iran, Algeria or any other country in terms of oil exports to the US. The US oil analysts actually believe that we have, in the Athabaska Tar Sands, an even greater amount of recoverable oil than the second largest holder of petroleum, Arabia. To extract a saleable barrel of synthetic crude from the tar sands wastes one to three barrels left in the ground and a further one to three barrels to refine the one we sell and send down the pipeline to Edmonton and then to the US or Eastern Canada. Tar sands oil requires a world price of at least $35 ber barrel which translates into about 72 cents a litre. Otherwise the tar sands refiners can not make money. None of them, all giant oil companies, will let that happen. They are political as well as economic giants.
 
Canada has already agreed to have the world price of Petoleum determine the domestic price we pay regardless of the fact that Canada is a huge exporter of oil and that fewer than 7% of Canadians (All in the Maritimes) need to use imported oil. You didn't know that? The Liberals under Pearson, Trudeau, and Martin, and the Mulroney Conservatives all confirmed this agreement in their times. Canada could easily have cheaper gas and oil because we could use our own low cost oil for many more years than can the other developed countries, except for Russia. The US now imports more than half the oil it uses. It produced 70% of its domestic requirements in 1960.
 
I admire the suggestion that we boycott a certain station or brand to bring down gas prices because it calls for people to actually do something. Too bad that just won't work.
 




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