Quebec: No letup for home heating : LUSENET : Grassroots Information Coordination Center (GICC) : One Thread

Montreal Gazette

Wednesday 3 January 2001

No letup for home heating Gasoline may be cheaper at the pumps but domestic oil and gas prices are high LIANNE ELLIOTT Freelance

A fill-up at the gas station might be cheaper these days but for residents paying more and more to heat their homes there is still no real relief in sight.

Price wars that have slashed the cost of gasoline by almost 10 cents a litre in the past two weeks have had little effect on home heating oil and natural gas, even though the two fuels often follow the trend set by gasoline prices.

Since mid-December, Montreal's heating oil companies report only a 2-cents-a-litre drop in the price of heating oil, bringing it to 52.9 cents a litre. At this time last year, heating oil cost from 45 to 49 cents a litre.

"Gasoline prices have had more of a turnover, whereas home heating oil hasn't fluctuated as much," said a spokesman at Les Huiles Norco, a Shell company that distributes heating oil to residents in the Montreal area.

As for natural gas, prices are on the rise.

The Industrial Gas Users Association reports that Gaz Metropolitain, which distributes 97 per cent of Quebec's natural gas, will be charging $8.48 for a gigajoule of energy in January, a price that has increased by almost $3 since November.

"Prices are high and they continue to stay high," said Peter Fournier, president of IGUA, an association that represents Quebec, Ontario and Manitoba companies that use natural gas.

About a $300 Hike

He says it will cost most Montrealers between $250 and $300 more to heat their homes with natural gas this winter, in comparison to last winter.

Representatives at Gaz Metropolitain could not be reached for comment yesterday because they were on holiday.

Shortages in natural-gas and heating-oil supplies explain why prices have remained consistently high.

"There is a shortage of heating oil," said John Butt, president of the Canadian Oil Heat Association, an organization that represents Canadian oil companies. "Right now refineries are producing more gasoline than heating oil because that's where they see the biggest demand."

Other factors that influence heating- oil prices are the state of the Canadian dollar and the price of crude oil, which dropped $2.19 to $25.77 a barrel on Dec. 20 in the United States, sparking the recent gasoline price wars.

Supply is also a problem with natural gas.

"Production has fallen in the United States, and that has affected Canada," Fournier said.

He said production began to decrease last winter as natural-gas sources became harder to find. This started a chain reaction. Prices started to climb, forcing natural-gas companies to delay building up their supplies. Normally, they build up a supply of natural gas throughout the year in preparation for the winter.

"They waited until the summer to store gas, in the hopes that prices would drop again," Fournier said.

"This meant there was a lot more buying in July and August than there normally is, which drove the prices up even more.

"Combine that with the low inventory available and high demand for gas in the winter, and it means gas prices are way up."

Strong Demand

Though supply has dropped, IGUA and the Oil Heat Association say there is no shortage of demand.

With Montreal temperatures dropping to an average of between minus-6 Celsius and minus-15C in January, furnaces will be pounding away to create a strong market for natural gas and oil.

In the province as a whole, it is estimated 16 per cent of homes are heated with oil and 6 per cent with natural gas. These figures are even higher in newer suburban areas, where two-thirds of homes are heated by natural gas.

However, most Quebec homes are still heated with electricity.

Though heating with natural gas and oil will be costly this winter, there is hope prices will drop eventually.

"Oil is getting back to last year's levels. We should be back there by March," said Butt of the Oil Heat Association.

For natural-gas users, the wait will be longer.

"Prices should stay high until the summer, while companies scramble to make up for what they lost," Fournier said.

"But in the long term, they will come down. Producers are drilling (for natural gas) and they will find the supply to balance the demand. It should swing back soon."

-- Rachel Gibson (, January 03, 2001

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