Gasoline jumped about five cents a litre last week, causing many motorists to worry predictions of $1-a-litre fuel might be true.
Farmers wondered where diesel prices would be the next time they fill their tanks.
But it seems the jump at the pumps is mainly a gasoline issue.
Michael Ervin, of MJ Ervin and Associates in Calgary, says the problem is North American refinery capacity.
In the early 1990s there was a surplus, but that was whittled away as more motorists hit the road, often in big gas-guzzling vehicles.
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Demand increased 25 to 30 percent since 1990, but refinery capacity was static. This spring is the first time supply was sharply squeezed.
While the Organization of Petroleum Exporting Countries was mainly responsible for rising energy prices last year, today’s gas price spike is a North American matter.
However, Ervin believes the feared $1 a litre won’t appear this summer. Gasoline spot prices on commodity markets peaked in April and have dropped since then as refineries finished spring maintenance and started full gas production to capture what are now excellent profit margins.
However, these spikes will return in future years as long as refinery capacity is static. But energy companies aren’t rushing to build because, with new technology such as gas-electricity hybrid engines and fuel cells promising lower demand in the future, the long-term profitability needed to warrant billion-dollar refinery investments is uncertain.
Ervin said diesel demand is more constant, so it does not have the same spring swings as gasoline.
The main driver of diesel price is oil price and there is no expectation of a sudden jump this summer.
But we can expect an environment of rising energy costs. United States president George Bush warned of a potential “darker future” last week when announcing policies designed to stimulate domestic energy production.
What can you do?
We discussed tractor efficiency in a story Feb. 15. The information is available from the Alberta Farm Machinery Research Centre at 403-329-1212.
For road driving, slow down. It takes 15 percent more fuel to drive at 100 kilometres an hour than at 80 km-h.
Avoid extreme acceleration and turn off the engine rather than let it idle for a few minutes.
Ensure tires are properly inflated.
Keep the engine in tune, and wheels aligned.
