Fuel prices continue to climb

By Blair Braitenbach
Staff reporter

As Calgary resident Rod Christensen fills up his Dodge van at seemingly exorbitant prices at an Okotoks gas station, his mood, like many others, is of reluctant acceptance.
“I’m like everyone else, I’m not happy. But, we have to do our driving so we have to pay. It seems like every company is charging the same price, you can’t go down the street and get a bargain,” Christensen said, noting the fill-up will set him back about $75.
In Okotoks, gas prices are averaging $1.22 per litre, while in Calgary it’s closer to $1.25 per litre. Diesel prices are also reaching record levels, averaging about $1.27 per litre in the Calgary area.
According to Dr. Frank Atkins, University of Calgary economics professor, the rising cost of gas is directly linked to the global oil market. As of last week, the price of crude oil reached nearly US$120 per barrel. Atkins stressed that despite Alberta’s reputation as a major oil producer, the provincial industry is no exception to the global oil market.
“There’s a world price of oil and you’re stuck with it, whatever it is, and it’s very, very high right now. Anyone who says that the world price of oil is not above where the fundamentals say it should be is kind of crazy,” Atkins said.
What is driving up the price of oil has to do with a number of factors. In North America, Atkins explained, a major short-term influence has to do with the United States’ low interest rates, which allows people to borrow money cheaply. He said because Americans have more money available to invest, much of it is going to oil futures, which contributes to the high price of oil.
Another factor adding to the high gasoline prices, Atkins said, is North America’s lack of refineries.
“Demand for gasoline has been going up steadily, and our capacity to supply it hasn’t been because we don’t build new refineries,” Atkins said, adding the last refinery built in Canada was about 30 years ago.
U.S. interest rates and few North American oil refineries, however, are only two pieces of the pie, Atkins noted.
“Then there are the usual suspects. Every time you turn around another pipeline in Nigeria is blown up or something,” Atkins said.
Then of course, like every other market, oil is subject to supply and demand, Atkins said. With spring and summer arriving, people tend to do more driving for recreation and holidays. Atkins argued one of the biggest contributors to the high price of gas is the drivers themselves.
“Every summer this happens, and consumers get all in a bind and Jack Leighton (NDP leader) in Ottawa froths at the mouth about the oil companies ripping everyone off and so on. But consumers never say ‘well, you know I buy a lot of gasoline in the summer months,’ which in itself keeps the price up,” Atkins said.
Dave Robertson, Town of Okotoks operations manager, said gas prices are a big factor in maintaining its budget. He said the Town buys fuel in bulk and budgets for about 108,000 litres of fuel per year, at $1.05 per litre. Right now the Town pays $1.07 per litre for fuel, an increase that really adds up. Robertson said every cent increase over $1.05 costs the Town roughly an additional $1,080 per year.
“We’re going to keep our eye on it (gas prices). We’re into conservation and trying to reduce wherever we can the use of fuel, but there are certain tasks that have to be completed no matter what,” Robertson explained.
Robertson noted the Town’s no idling policy and purchase of a new hybrid car for the downtown office. He said some of the equipment the Town has purchased in recent years are made to shut down automatically when not being used.
“We’re focusing on whatever is highest efficiency that we can get, that’s a major focus in our selection of equipment,” Robertson said.
With the Foothills School Division anticipating a $140,000 shortfall in its transportation budget, Drew Chipman, secretary-treasurer of the FSD, said high gas prices are exasperating the situation. Although he noted the school division also buys its fuel in bulk, he said it is still seeing an increase cost of about seven per cent for fuel. However, he noted the province often compensates the school board when gas prices go through the roof.
“(Fuel) is still going up, and that’s the problem, we don’t know what it’s going to do for the rest of the year,” Chipman said. “We hope that our bulk fuel costs, which are related to busing, will covered by the province’s fuel initiative.”
In terms of everyday drivers, the key word, according to Atkins, is adaptation. He said gas prices are not expected to go down significantly anytime soon, at least until the fall. He believes that high gas prices shouldn’t necessarily be considered a negative thing as they create a wider appreciation for new, fuel efficient technologies, such as hybrid vehicles.
“High gasoline prices are probably, in the long run, good because what they are going to do is eventually cause you to think very hard about how you are using gasoline, and you’ll use it wisely,” Atkins said,
Atkins added commuters need to consider the pros and cons of living far from their place of work.
“The reality is if you are a commuter and the price of gasoline gets high enough and stays high enough, you’re going to stop commuting. You’re going to change the way you are doing things,” he said.