CNS Canada — While the price of crude oil continues to decline across North American markets, diesel remains stubbornly high in Western Canada.
Prices are equal to gasoline, or in some cases, exceeding them by as much as 10 cents in some Saskatchewan and Manitoba locations.
“Diesel production in the West has been crimped by months of turnaround issues and heavy focus on gasoline,” said Dan McTeague of GasBuddy.com.
Some of the distribution problems diesel encountered in 2015 included a leaking Enbridge pipeline in Alberta as well as a broken crude distillation unit near Chicago at Whiting, Indiana, which carries 413,000 barrels of crude a day.
“In Western Canada, refineries have not produced as much as expected and this is the time of year prices go up” traditionally, McTeague said.
According to McTeague, the price of low-sulphur diesel in the U.S. is now around US$1.35-1.40 a gallon.
“When you convert that, it’s just a little bit under what we’ve been seeing for Canadian diesel prices… so there is a regional problem with diesel production, unless you’re on the East Coast,” he said.
Currencies’ rises and falls will continue to impact price, said McTeague.
“It’s important to note that all of our energy is priced in U.S. dollars, so we’ve seen prices remain significantly higher than one would expect given where crude is at.”
Canada’s weakened currency doesn’t mean we get the same advantages Americans do on their production of diesel, according to McTeague.
“They’re actually seeing declines in prices in ways that Canadians have not,” he said.
The high-demand season traditionally runs from now until April, and McTeague said anyone buying now will run into a heavily hedged market.
Fortunately, he said, the unseasonably warm temperatures now seen across most of Western Canada should help reduce the pressure on prices.
“Given El Nino, and what appears to be the emergence of warmer weather, it likely won’t have the same type of shock and impact we’ve seen in previous years.”
— Dave Sims writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.