Bad choices

It has been a hard, cold winter. But few have been harder hit this season than those families who heat their homes with propane. In the last six months, the price of this heating fuel has more than doubled.

Folks with monthly fill-up bills of $350 and $400, are now paying $900 and $1,000 or more. Worse, the unrelenting cold temperature means that furnaces are running longer, consuming more fuel and driving bills even higher.

Many County families are being forced to choose between heating their homes or eating well—in the tightening vice of household energy bills, food has become negotiable.

This need alarm us all.

How did it get this way? How did the price of a basic commodity spike in just a few months? Is the market fixed? Are speculators making fortunes on the backs of homeowners shivering in the cold? MP Daryl Kramp says his government wants answers. They are evident if only he, or his government, bothered to look. Folks up and down the propane supply chain point to a variety of factors. But the explanation begins as all commodity stories do—with a fundamental breakdown in the demand and supply balance.

In the early ’70s there were 40 refineries producing propane in Canada. Today there are just 19. There hasn’t been a new propane refinery built in this country in over 30 years. In the early ’80s the propane refinery storage capacity was about 17 million barrels—today that capacity has shrunk to eight million barrels.

We allowed our supply capacity to dwindle so dangerously low that we became vulnerable to spikes in demand. Spikes like those we’ve experienced this winter. It has been a generation since we’ve seen a winter like this. We were lulled into believing traditional winters were a thing of the past.

The cold has been unrelenting. And not just here. Much of North America has endured a frigid winter over many weeks. Furnaces and heaters are burning that haven’t been ignited in years.

As one industry insider explained to me, “Turn on 100 million more furnaces, it has an impact on the supply.”

More than 70 per cent of the propane produced in this country is exported, primarily to the U.S., which means the price of propane is particularly exposed to the flame burning in American furnaces.

Other factors have likely amplified the supply and demand squeeze. Propane distribution has been hobbled by management systems seeking to put order in the marketplace. Now many local distributors are stuck without sufficient supplies— forcing some to ration their own allocation and the tanks of their customers.

Consumers are also being buffeted by a spike in agricultural and industrial demand for propane. Improved prices for corn over the last decade had led to a sharp increase in the quantity and capacity of propane-fuelled grain dryers across North America.

Residential use of propane is less than 10 per cent in Canada—so there is little homeowners can do to affect the price. They are exposed and vulnerable to a market that doesn’t really need them.

The answer Mr. Kramp and his government is looking for is obvious: short term relief for those families most direly affected by the spike in prices. Then a clear signal must be sent that governments at all levels are interested in engaging in a sensible and practical discussion about energy in this country—this means increasing refinery and distribution capacity. This means a willingness to facilitate refinery building in this country. This also means pipelines. It doesn’t mean acting rashly or throwing subsidies at developers or multi-nantionals. The market need only see that governments are serious about adding capacity to the system, and prices will ease.

For two decades we have been soothed by fantasies that our economies could be fuelled by unproven and unreliable alternative sources—free of the risks that come with current energy sources. Or that we could simply do without. We were fed the notion we could simply adjust our lives around the vagaries of more benign forms of energy. If only it were so simple.

What this crisis has demonstrated rather miserably this winter, is that for many families, the choice isn’t between how they keep their family warm, or what form of electricity will keep their lights on. The choice they are making, is whether they and their children can eat today.

This is unacceptable.

Energy is an essential ingredient in our economy and in our daily lives. For too long, it has been a political plaything—a tool to garner votes and appease special interest groups. Pandering to these fantasies has cost us billions of dollars and lost critical decades.

It is time we said enough, and set to work rebuilding the energy infrastructure in this country— not for some grand sense of future prosperity, but rather for the more humble ambition of feeding and nurturing our children.

rick@wellingtontimes.ca