Costs on the rise

In the past two weeks my wife and I have crossed back and forth in Ontario. One of the items everyone pays attention to on road trips is the price of fuel. When we started in the Fort, regular gas was just over $1.40 per litre. We were surprised as we passed Terrace Bay and the price had risen to $1.51 after we had gassed up in Nipigon at $1.44. Prices declined as we travelled down 400 to as low as $1.27.

Returning, Waterloo gas prices for the Thanksgiving weekend spiked from $1.399 to $1.449. When we filled up in Espanola the price was $1.379 and then $1.429 in Sault St. Marie and kept climbing all the way to $1.619 in Marathon and Terrace Bay before settling to $1.549 in Thunder Bay.

The pandemic is having another crude impact on our lives.

Watching the price of crude oil rise, we shouldn’t be surprised at the rising cost of gasoline. Come this winter, we will experience a rise in heating costs whether we are using fuel oil, propane, or natural gas. With growing demand for consumer goods nations around the world are scrambling to find natural gas to operate power plants. The demand for liquified natural gas has risen exponentially and ships are lined up at exporting ports in North America, South America and Australia delivering that gas to Asian markets. The demand for natural gas is diverting gas from North America and driving up natural gas prices to factories and homes.

In Europe many of the nations relying on natural gas from Russia have experienced major cost increases in natural gas prompting Germany to restart many of its coal fired power generation. Russia has diverted natural gas to China.

Rolling brownouts in China have forced the Chinese government to again begin using coal to create electricity. When the pandemic struck, those plants closed, and the need for coal was reduced worldwide. Now in post pandemic recovery times, the coal to fire those plants is not available and that too has driven up prices for the dirty fuel. Because of the rolling electrical blackouts, factories making consumer products for the North American and European markets are falling behind in productions and deliveries are backed up.

Particularly hard hit are tech goods. Analysts are advising to shop early for this Christmas as many of the Christmas gift items will not arrive until next year because of supply chain problems.

The agriculture industry will be hard hit as well. Natural gas is used in making ammonia for fertilizers and as the price of natural gas rises, those costs will appear in the fertilizer needed for next years crop planting and consumers will see those increased costs on produce shelves in the second and third quarter of 2022.

All of these expectations could be false, but we must be aware that the price of energy we use is not controlled by Canada, but rather is controlled by world demand.

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