Canada Fears Rising Gas Prices

Joanna Schroeder

I just returned from Toronto, Canada after attending the 2011 BIO World Congress (great stuff and check back as I post a series of audio interviews from the conference) and the country is feeling the impacts of rising gas prices. Consumers in Central Canada have seen gas prices rise nearly 30 cents almost overnight despite the drop in oil prices and many consumers are asking the question of who to blame. The front page article in The Globe and Mail on Wednesday, “The gas price puzzle,” stated that gas prices are higher now than in 2008 when a barrel of oil hit a record high of over $150 a barrel.

According to the article a “confluence of events” has caused the prices to skyrocket. “They include an unusual price discrepancy between European and North American oil and below average gasoline supplies in the U.S., which drives up whole-sale prices that also affect Canada.” Other factors include geography and bad weather south of the border.

Don’t let out sigh of relief that biofuels escaped blame. They didn’t and today a coalition of Canadian on-road diesel fuel associations are raising concerns that the biodiesel mandate set to go into effect in Canada on July 1st will actually cause gas prices to go even higher.

According to the coalition, which includes the Canadian Trucking Alliance (CTA), Motor Coach Canada (MCC) and the Owner-Operator’s Business Association of Canada (OBAC), the Canadian government’s own regulatory impact analysis statement predicts the biodiesel mandate will cost taxpayers $2.5 billion over the next 25 years and increase pump prices for diesel fuel. The report also believes fuel economy will decrease and any greenhouse gas emission reductions will be negligible.

To support their point, the coalition pointed the finger at Massachusetts and New Mexico’s biofuel mandates that allow for the suspension of the regulation should the price of diesel fuel be more than conventional diesel fuel. In addition, the coalition says that U.S. state biodiesel mandates have raised diesel prices anywhere from 1-8 cents per gallon, even with subsidies.

The coalition also cited other fears. The price of canola is at record prices and volumes. The country will have to import 85 percent of its biodiesel to meet the mandate and they cite higher costs of food as another reason to abandon the mandate. In addition, they believe the biodiesel will harm engines, cause problems in the winter due to “cold start issues” and void warranties.

“The biodiesel mandate is going to exacerbate the problem of higher fuel costs through increased prices at the pump and through reduced fuel content of biodiesel,” said David Bradley, president and CEO of the 4,500 member trucking alliance. “The only question is by how much. We can’t control some of the things that are currently impacting fuel prices, but we can avoid introducing policies domestically that could make things worse. In addition, the biodiesel program is completely inconsistent with the federal government’s announced intention to introduce a national fuel economy/GHG reduction standard for heavy truck engines,” he said.

Brian Crow, MCC president, says bus companies, like trucking fleets, are worried about the impact the biodiesel mandate will have on the costs of operating a motor coach, as well as on engine durability and operability. Currently there are no Canadian standards for biodiesel production, limited blending facilities to make the product and government plans to allow the retail sale of biodiesel above recommended manufacturer warranty levels for both light and heavy-duty vehicles putting consumers at risk for expensive repair bills.

The long and short of the argument is that the coalition would like to see the mandate disappear before it arrives; whereas the country’s biofuel industry believes the mandate will spur economic growth and provide jobs among other benefits.

“If governments want to go down this road they should mandate that all government vehicles – buses, trucks and cars – should be the guinea pigs, not the people and companies trying to stay afloat during these very difficult times,” concluded Crow.

Biodiesel, biofuels, food and fuel, International, Opinion