and Denise Mullen
Business Council of B.C.
Metro Vancouver residents are rightly upset over paying the highest gasoline prices ever recorded in a North American city. Cost-of-living pressures are already significant for many households in British Columbia, making the recent jump in pump prices particularly hard to stomach.
The unprecedented attention being given to gasoline prices underscores a couple of facts.
First, fossil fuels, including refined petroleum products, remain the lifeblood of modern economies, including in B.C., and they will continue to play this role for the next two decades (at least).
Second, like it or not, the market is working. When demand for a commodity increases but supply is constrained, as is the case with refined petroleum products in B.C., prices go up.
Let’s consider the bigger picture.
The world’s demand for energy is increasing as the population grows and more emerging economies industrialize. The current energy mix is dominated by fossil fuels, which account for 81 percent of global consumption. Oil and refined petroleum products satisfy 32 percent of world energy demand, followed by coal at 27 percent and natural gas at 22 percent.
What about alternative forms of energy?
The combined total for hydro, wind, nuclear and other small electricity renewables is less than 20 cent of global energy consumption. This share is projected to edge higher over time.
But even under the most aggressive scenarios for moving to a lower carbon future, fossil fuels will remain at the heart of the global energy system.
Why are fossil fuels so stubbornly dominant in the energy sector?
It’s simple physics: energy density. That’s the amount of stored capacity in a given mass that can be converted to do productive work (e.g., heat a home, power a vehicle, etc.). The higher the density of a fuel, the more value it delivers – and the cheaper it is to transport that fuel on a per unit basis.
Crude oil and its byproducts are the densest of all fossil fuels; they also benefit from well-developed, tightly-integrated supply chains.
Global transportation systems, from cars to commercial trucks and aircraft, along with all manner of manufacturing processes, depend on oil and refined petroleum products. Some day this may no longer be the case. But until there are cost-effective and widely available substitutes for the kind of work that oil and other fossil fuels do, the world will continue to depend on them.
In British Columbia, refined petroleum products are the largest consumed fuel-types. They represent about two-fifths of all of the energy used in the province. They are mainly consumed by the 3.7 million registered vehicles on the roads in in B.C. (four-fifths of these are personal-use cars and trucks).
How does B.C. meet its demand for refined petroleum products?
We have a refinery in Burnaby and a smaller one in Prince George. Together, they produce only a modest portion of the refined petroleum products consumed by B.C. residents and businesses. The rest comes from Alberta, delivered primarily via the capacity-constrained Trans Mountain Pipeline, plus from the United States.
Governments talk about providing incentives so people and businesses become more efficient in using energy and shift to lower-carbon energy sources. This is a sound idea.
But the results of greater energy efficiency materialize over the long term, not according to the abbreviated timelines preferred by politicians.
Globally the demand for fossil fuels is still rising, as emerging economies grow and pursue higher living standards. Even in Canada, the federal government’s plan to substantially ramp up immigration means more energy consumption, some of which will be provided by fossil fuels.
Market penetration by electric and hybrid vehicles will weigh on the future consumption of refined petroleum products in the transportation sector. But as B.C.’s population climbs from five million to 6.3 million over the next 20 or so years, the demand for fossil fuels is expected to increase.
Against that backdrop, it’s a safe bet that British Columbians will have a keen interest in the cost of gasoline for some time to come.
Jock Finlayson is executive vice-president of the Business Council of British Columbia. Denise Mullen is director of environment and sustainability at the Business Council of B.C.