With prices jumping to $1.20 per litre in some places—having risen almost five cents in two days—Toronto is facing prices similar to the summer of 2008, right before the last recession started. Who gets the blame depends very much on who is being asked. Here, a rough roundup of the potential suspects.
Libya: While it’s a relatively small oil exporter (exporting less oil than Canada, itself a small player next to giants like Russia and Saudi Arabia), the chaos in Libya has the markets nervous. As much as it’s possible for business pages to come to a consensus on anything, this is the short-term explanation for the last few days.
Everyone else: But wait! Oil prices were heading up at a gallop well before the recent unrest in the Middle East. (And why isn’t “unrest in the Middle East” considered a permanent condition at this point?) Between a recovering economy in the West and rising markets in China and elsewhere, there’s just too much demand.
Oil companies: If the BBC is to be believed, the big oil companies have long failed to invest in more and better refining capacity. Basically, OPEC countries have some spare capacity to replace Libya, but it’s lower-quality oil that Western refineries can’t handle. Some are calling shenanigans, saying this is an excuse for OPEC to do nothing but sit back and count its money.
Saudi Arabia: It’s not possible to talk about oil production without talking about the Saudis, so let’s. According to documents released by WikiLeaks, the kingdom simply doesn’t have the ability to grow its production higher than its 2008 peak—contradicting claims made by Saudis and Western energy analysts alike that there was room to grow. If the Saudis can’t open the pipes, then the global economy is in for a nasty, protracted shock. And someone owes Jeff Rubin a beer.
Fortunately, Toronto has been far-sighted and working tirelessly to reduce its dependence on gasoline with construction beginning on a city-wide network of light rail lines the War on the Car is over.
(Image: Mike Gifford)