OTTAWA - The harsh reality of this winter's exceptionally cold weather is catching up to millions of natural-gas users in central Canada.
The natural-gas company Enbridge has applied to Ontario regulators for a nearly 40 per cent hike in the energy rates it charges customers, just one month after predicting that its massive storage capacity should mute any price increase.
But it has been so cold, for such an extended period, that the utility says it was forced to buy more natural gas — at a much higher cost — than expected.
"For a customer that does burn 3,000 cubic metres of gas a year, the increase for them is going to be in the order of $400," said Enbridge energy supply and policy director Jamie LeBlanc.
Normally, such a household would typically pay roughly $1,000 annually for natural gas.
If approved by the Ontario Energy Board, the rate increase would take effect April 1.
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About<a href="http://energy.gov/articles/hows-and-whys-replacing-whole-barrel" target="_hplink"> 40 percent of an oil barrel</a> yields gasoline; the rest generates a variety of other petroleum-based products, according to the Department of Energy. Anything made out of <a href="http://www.postandcourier.com/news/2010/jun/12/petroleum-based-products-are-around-us-in-us/" target="_hplink">plastic is derived from petrochemicals</a>--chemical products made from petroleum--and therefore, its production depends on the price of that barrel.
Besides delivery charges, the cost of manufacturing <a href="http://www.orionmagazine.org/index.php/articles/article/314/" target="_hplink">certain medical products depends on oil prices</a>. Heart valves, artificial limbs and other kinds of medical equipment contain petroleum-based plastics. Antihistamines, antibiotics, antibacterials, analgesics and many other items found at pharmacies and hospitals use petrochemicals. Photo by <a href="http://www.flickr.com/photos/44534236@N00/" target="_hplink">faungg</a>
Cosmetic And Household Products
<a href="http://www.greeniacs.com/GreeniacsArticles/Energy/Petroleum-Products.html" target="_hplink">Deodorants, soaps and lotions</a> are all made from petrochemicals. <a href="http://www.anwr.org/features/oiluses.htm" target="_hplink">Vinyl flooring, floor wax and lots of house-cleaning supplies </a>also contain oil. If manufacturers need to pay more to produce these products, their prices at retail stores will likely increase as well.
It might make sense to buy things online and have items delivered to your front door instead of burning gas on shopping trips. But shipping companies also use planes, trucks, ocean vessels and railroads--all of which require oil. <a href="http://www.fedex.com/us/services/fuelsurcharge.html" target="_hplink">FedEx</a> and <a href="http://www.ups.com/bridge/fuelsurcharge.html" target="_hplink">UPS</a> make customers pay fuel surcharges in addition to regular shipping costs in order to offset increases in the price of oil.
Unfortunately the items you see in stores don't grow on shelves. Most products were once on a truck. As gas prices go up, so do delivery costs. Shop owners will offset an increase in costs by <a href="http://money.cnn.com/2012/02/28/smallbusiness/gas_prices/index.htm" target="_hplink">charging you more for their goods</a>.
Things That Grow From The Ground
Farmers need fuel to run their tractors. This means you'll be paying more for fruits and vegetables. You'll also be spending more to maintain your home landscaping--lots of lawn equipment burns fuel. Photo by <a href="http://www.flickr.com/search/?q=Soil Science" target="_hplink">Soil Science</a>
<a href="http://www.greeniacs.com/GreeniacsArticles/Energy/Petroleum-Products.html" target="_hplink">Nylon and polyester</a> are made in part from petroleum-based fibers. This means the cost of your workout attire might be affected by the price of oil.
<a href="http://www.cbsnews.com/8301-505245_162-57387089/facing-costly-fuel-airlines-push-fares-higher/" target="_hplink">Deutsche Bank analyst Micheal Linenberg recently predicted </a>that to offset higher fuel costs, airlines will be increasing fares and decreasing the number of flights and sale offers. If you are thinking of vacationing anytime soon, book your plane ticket now.
Petroleum-based lubricants--such as transmission fluid, grease and motor oil--are what make your automobile function properly. High petrol prices mean that these materials will likely cost more to produce. When you go to the repair garage, don't be surprised to see higher fees for maintenance costs. Photo by <a href="http://www.flickr.com/photos/sylvar/" target="_hplink">sylvar</a>
If you live in a city, then you probably expect to pay a certain rate for using public transport. Increased oil prices will likely affect that fare in the long run.
But once taxes are added, the price increase is closer to 50 per cent, says former Liberal MP and energy-market watcher Dan McTeague, who advocates capping taxes on home-heating fuels.
"My estimate is that, within a year ... the federal government will have probably pocketed an additional half billion dollars from the misery of Canadians trying to keep themselves warm," he said.
"And that to me is outrageous."
Other natural-gas suppliers are expected to also apply for rate increases as they are forced to buy more expensive energy supplies on the open market.
Households heating with propane and oil have already experienced a price shock.
Propane customers in eastern Ontario and western Quebec saw their home heating bills nearly double in January and February compared with what they were paying in November.
Even those with fixed-price contracts have seen their bills go up because they've been using more energy.
Natural-gas prices in Ontario are set every three months, and Enbridge said it doesn't expect prices to remain high.
"We don't believe that this is a long-term natural gas event," said LeBlanc.
"A typical winter we wouldn't see this type of pricing."
But that's cold comfort for people on fixed incomes, such as seniors, who have had to absorb the energy price increases by spending less on other necessities including food, as well as cutting back on non-essential purchases.
"People are suffering," said McTeague.
Enbridge and other utilities have energy assistance programs available for low-income households, as well as payment plans to spread out the cost of heating over a longer period of time.
They also offer tips for conserving energy by turning down thermostats, reducing hot water use and, as a longer-term solution, retrofitting homes for better efficiency.
Earlier this week, a preliminary report to the ministers of natural resources and industry predicted that a propane shortage that hit Ontario and Quebec would continue until temperatures warm up.
"Given current production, storage, transportation and export trends, tight supply and high prices are expected to continue for the remainder of the high-demand winter season," said the report made public Tuesday.
"Consumers of propane, including households that cannot easily switch to other fuels, will continue to be significantly impacted."
The federal government asked the National Energy Board and Competition Bureau to review the propane market after supplies dried up and prices skyrocketed.
The report said there were four main factors for the shortage — a colder-than-normal winter across eastern Canada and the U.S., exceptional use of propane to dry wet crops in the U.S. midwest, and already-low inventory before the peak winter season and "rapidly growing" U.S. propane exports to overseas markets.
But it offered no recommendations on how to mitigate shortages and energy price shocks in the future.