The Oil Drum: Canada

there is an e-mail circulating about how we are being ripped off by big oil here in Canada .. below is my response to a friend who forwarded this to me .. am I essentially correct or is there a better response and more acurate way of stating it? the original e-mail is at the end of this ..
Don

Hi Sheila,

Yes, I know the dollar value argument but aside from the figures cited below being wrong this is not the correct view of the price of GASOLINE in Canada. Firstly, we export as much crude oil as we import, selling and buying at the world price. I don't have the figures but the contract price for actual oil sales is different than the announced traded price and this difference has narrowed over the past year so that the commercial price has become closer (ie increased faster) than the WTI spot price. However the North American gasoline market is totally integrated so that we are exposed more to the US wholesale price instead of being decoupled. We pay higher prices due to taxes more than anything and of course we pay much less than Europe and the UK (hit 1 pound per litre last week). If you actually look at the whole year (picking Oct 1 is convenient to prove some point but we should look at right now) from Jan 1 to this week the price of crude has increased about 60% (see below) while the value of the Canadian dollar relative tothe USD has increased about 17% so the actual price of crude for us has increased over 40%. The price of gasoline has fluctuated in a range of 10 to 15% so the price has actually stayed lower than it would if the crude price/dollar trade off is taken into account. The price of gasoline has lagged for a couple of reasons. One is that the companies have actually been afraid to raise prices due to the negative reaction of people and politicians, especially in the USA. Also they have been drawing down inventory of crude that was purchased when the commercial price was lower so they have not passed on replacment costs to the public .. YET. But they are beginning to do so now as supplies of the stored high quality crude are being depleted and they have to find expensive replacement. Also the US has been imprting huge amounts of finished gasoline, not the most reliable way to ensure supply. The price of gasoline increased about 10% in the past two weeks.
What we need to worry about is supply. The US gasoline inventory is about a day and a half of consumption above minimum operating levels (the point when the pipelines stop operating because they arent being given as much gasoline as being drawn out). Remember our shortages in the winter? A combination of local refinery problems with a rail strike that reduced imports made local shortages here. If the distribution pipelines stop then that will be widespread. There are already diesel shortages in the USA and even some parts of Canada due to distribution problems. Normally inventories rise in winter and prices drop for gasoline but this winter, for the first time, prices are rising all over North America and inventories are not showing much increase. As well they still are drawing more crude from inventory than using new purchases. Another problem is that most refineries need light non-sulfur crude and that supply has been declining world wide since 2005. Refineries have to use heavier sour crude and some can't handle it and some can't make as much gasoline etc from it than the light stuff. I honestly expect real shortages in 2008 if consumption does not decrease. In the longer term we will be forced to reduce consumption as supplies tighten and prices really take off. This might be 2008 but certainly by 2011. Sorry to be so cheerful but that is what I see.

12 MONTH PRICE OF CRUDE TO NOV 2007
http://newsvote.bbc.co.uk/2/shared/fds/hi/business/market_data/commoditi...

12 MONTH US$ VS CD$ 2007
http://newsvote.bbc.co.uk/2/shared/fds/hi/business/market_data/currency/...

ORIGINAL MESSAGE

I have been watching the news, the past few weeks, about the price discrepancies, now that the Canadian and American dollars are now trading at par.
People are complaining about the cost of winter jackets in Quebec, the cost of books at the book store, the cost of toys at Wal-Mart and the amount charged to cross the bridge to get the US to scoop up bargains.
Yet no one complains about the biggest rip-off of them all.

Do you realize that we are all being cheated every day by the big oil companies and no one has noticed?
Let me explain it to you in simple terms. Crude oil is sold around the world in US dollars. On January 1, 2007 a barrel of oil was selling for approx. $75 US. That translated to approx. $110 Canadian. On October 1, 2007 a barrel was selling for approx. $80US which translates to approx. $80 Canadian or at par.
What that means is that we here in Canada, can boast that the cost of a barrel of oil, for us, has decreased by $30 a barrel. No other country in the world has ever seen a decrease of that magnitude. That should make us ecstatic. But we are not, because in that same period, the price of a liter of gasoline has increased by $.15.
I wonder what excuse the big oil companies are going to come up with for not passing some savings on to us consumers. They do not hesitate to pass price increases on to us, do they?

SEND A COPY OF THIS MESSAGE TO EVERYONE IN YOUR CONTACT LIST AND ADDRESS BOOK, ANDS LETS GET THE WORD OUT!!!!!!!!!!

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I wish we could afford the life we are living.