Furnace oil is basically kerosene, as is diesel fuel (used in diesel engines, obviously), stove oil and aviation fuel. All of these products are very similar grades of fuel oil, refined or treated in slightly different ways for different purposes. Aviation fuel needs to be able to pour at very low temperatures; P50 grade will still flow at -50°. Stove oil was used in pot burning appliances. Furnace oil is a better grade, used in appliances with a forced air burner. Kerosene sold for lamps is much cleaner, and fuel for diesel engines must meet strict specifications for contaminants, pinging, etc. Folks with some skills in maintaining diesel engines have long illegally used furnace oil in road vehicles to avoid the road tax, which is likely what is happening in the South American example described above.
This higher cost of furnace oil is likely one of the side effects of peak oil, which is the recognition that the greatest worldwide extraction of crude oil per year happened in the year 2005, and we have been pumping the same amount or less than that each year. At the same time, demand in the developing economies has been increasing. Here in Canada the refineries buy their crude oil (and sometimes refined products) on the open market, and we are thus in direct competition with the South Americans (and all other consumers worldwide) for a piece of a shrinking supply of oil.
Most homes in North America are heated with natural gas, with the exception of large parts of New England and large parts of Eastern Canada. Because our heating oil is very similar (in refinery terms) to all of the other kerosene grades listed just above, we are competing for furnace oil with all of the airplanes, all of the trucks and diesel cars, all of the construction equipment, many electrical generating plants, and even all of the small household stoves in India where kerosene is the fuel of choice.
There are several theories about how this will all play out. One theory says that oil will be rationed by price, meaning that those who can afford to pay for it will buy oil, and those who can’t pay will be shut out. In terms of home heating fuel, some people will be able to heat their homes and others won’t.
Another theory says that whole regions or countries will be shut out of the oil market because they do not have the foreign exchange to pay for it. Malawi, for example, does not sell enough goods abroad to secure enough US dollars to pay for all of their oil needs, so that while the local driver in Malawi may have his local currency to pay for gasoline, his country did not have the US dollars needed to buy the gasoline internationally, and so the pumps are dry.
Another worry is that oil-producing nations are increasingly using more of their production domestically, and so less is available for sale on world markets. Saudi Arabia, for example, burns increasing amounts of its crude oil to fire electrical plants so that air conditioners, desalination plants and other industries can continue to run. Venezuela is said to retail gasoline for pennies per gallon, which encourages domestic use.
Yet another worry is that some of the developing economies (China is particular) are investing in foreign oil infrastructure in return for future contracts for the sale of oil. They are active in Nigeria and Venezuela (and Canada) and other oil-producing countries, investing all of those US Dollars they earned manufacturing goods for western countries. Oil so contracted will not be available on the open market for us to buy.
For all of these reasons and others, the worry about furnace oil prices on PEI should include worry about whether oil will even be available all through the heating season in future winters. A few years ago there was a great shortage of heating oil in parts of Cape Breton caused by severe weather conditions that prevented regular deliveries of oil to the region. What if there was a shortage of oil available to the entire province some future February?
A second recent story detailed the problems a local lady had finding a supply of firewood for the winter. It seems that there is not a lot of hardwood available on the Island for a couple of reasons: high snows and bad weather last winter limited the amount of harvesting in many woodlots, and lower demand for softwood meant less harvesting overall, and hardwood is generally brought out with softwood harvests.
The good old days of cheap and reliable heat for the winter may soon be a thing of the past.
CBC News Posted: Oct 11, 2011 4:19 PM AT