The Closure of Shell’s refinery (Montreal) and what it means to you……. you guessed right, higher prices and Canada will now be a net importer of fuel products for the first time since the 1950’s:

As I suggested to some before December, Shell has just announced it will be closing its refinery in Montreal. While most media see this as merely a business item, the reality for consumers in Canada bears greater significance. Canada has already witnessed a dangerous and precipitous fall in the number of refineries in the past two decades. Putting this in real numbers, the shutdown of the Shell refinery in Montreal – which processes over 130 000 barrels of crude per day – represents between thirteen and fifteen percent of the entire production scene for eastern Canada. When you consider the recent shutdown of Toronto’s last refinery (PetroCan-Bronte) and the recent but not surprising blessing by the Competition Bureau of Sunoco’s takeover of Petro Canada, the supply picture in much of Canada goes from murky to grim.

Bottom line, there will be less supply for intermediaries/independents, other than the big four in eastern Canada, and given this refinery will be transformed into a terminal, Canada will inevitably become more subject to the turbulent crosswinds of international political and economic circumstance. Given some media’s parochial understanding of this industry, future price increases above supply and demand fundamentals means inevitable higher costs for us domestically. A bad supply situation in eastern Canada just got a whole lot worse.

FYI: I wasn’t sure whether to laugh or cry with this morning’s story from the Globe and Mail in Calgary which suggests a pattern of closure of refineries is also afoot in the US. The three mothballed US refineries the article cites represents less than four percent of US production and were apparently closed due to skinny refinery margins.

While this may be true for the US picture given that their strong anti-trust law promotes cutthroat competition among refiners, which leads to tight margins, the same cannot be said for Canada where – as this site proves daily – wholesale prices move in lockstep at 4:00 pm every business day and always with a mark-up that is 30-80% higher than margins in the US (ex: yesterday’s NYMEX crude-to-rack spread was 4.6 cents per litre while Toronto’s was 10.3 cpl!). That’s what makes this closure so alarming.

Misinformation like this costs Canadians dearly. CANADA NEEDS AN ACCURATE WEEKLY PETROLEUM INVENTORY REPORT as the US provides by law and which, ironically, our own department of Natural Resources supplies to Americans….. but not Canadians.

Does anyone think that shutting down Parliament at this time was such a great idea?