This article is the second of three feature stories examining how changes in the fuel industry have greatly impacted North American society, including Brampton. Part two attempts to make sense of volatile gas prices and their impact on Canadians. Look for Part III next week.

It has become a national obsession, really, right up alongside talking about the weather.
How it came about no one is really sure, though it’s apparent the discussion isn’t going away any time soon.

With prices so high these days it seems the “G” word is on everybody’s mind— gasoline.
“I don’t understand how it (gas prices) can go up and down so much,” said Brampton resident Phil Patafio, 24, filling up his vehicle at a local Sunoco station over the Labour Day weekend. “One day the price is at $1.24 or $1.25 (per litre) and then a day later it’s up to almost $1.30? I just don’t get it.”

But those feeling the pinch at the pumps aren’t likely to find relief; nor can they expect to get a solid answer as to why they still pay more even though oil prices have dropped some 20 per cent.

For five days last week, oil prices fell consistently to about $108 a barrel.
That’s a far cry from its record high of $147.27 on July 11, when prices at the pump reached almost $1.40 a litre.

Oil is down yet the amount people pay does not reflect that decline.

“It’s getting ridiculous,” Patafio continued. “We should all get together and boycott (gasoline retailers).” Feeling the heat from constituents, federal politicians called on the petroleum industry to address the issue in late August.
Among those that stood before the House of Commons committee on Aug. 27 was Peter Boag, Canadian Petroleum Products Institute (CPPI) president.

Boag told committee members that although “Canadians’ frustrations” with fuel price volatility is understandable, truth is the marketplace is delivering quality products at the lowest price.
Boag stated volatile prices are largely due to factors beyond the industry’s control— namely taxes, environmental regulations and speculators stirring up the stock market.

Boag stressed that despite current costs, Canadians still pay reasonable prices for fuel compared to consumers in other countries.

“Notwithstanding this turbulence, Canadians pay the second-lowest price in the Western world for petroleum fuels,” Boag continued.

How Canadian gas prices compare with those in other parts of the world may put the situation into perspective.

However, it won’t do much to help the average Canadian working to make ends meet.
Recent Statistics Canada data shows, Canada’s inflation rate jumped to its highest level in more than five years (3.4 per cent in July) — due largely to the nearly 30 per cent hike in gasoline prices over 12 months.

The impact of expensive fuel has been particularly felt in Ontario, where inflation has managed to exceed “real wages”.

While consumer prices in Ontario rose by 3.6 per cent in the 12 months ending in July, average hourly wages only reached 3.5 per cent during that same period.

That means Ontario workers actually earn less money (0.1 per cent less per hour) than they did a year ago, revealed Statistics Canada.

“Gas prices are a concern for me,” added Mike Capozzi, 31, also of Brampton. “I am spending about $70 a week on gas now. Driving is expensive.”

And it will likely be that way from here on in, suggests Luis Seco, a professor of finance at the University of Toronto-Mississauga.

Understanding fuel prices is complicated.

How much gasoline costs is determined by a slew of factors including oil production and refining, global conflict and even torrential weather. 

In trying to make sense of current gas pains, and how the situation will look moving forward, Seco said it all boils down to the principle of supply and demand.

The last “energy crisis” occurred in the 1970s when oil shortages drove up the price of fuel.
A lack of supply meant oil cost more, and the demand for gasoline decreased.
Basically when demand dropped, so did prices.
But unlike the 1970s, oil supply is ample and there is no shortage of people turning up at gas stations across the planet.  

Demand for gasoline in emerging economies is driving up the global price of fuel, Seco charged.

“India and China are becoming the predominant consumers of it and it doesn’t seem like they are going to slow down,” said Seco noting the idea of paying $2 per litre for gas isn’t farfetched. “Even if North American demand goes down, it won’t affect the price of gasoline as much as it did in the 1970s because North America is now a minority consumer of oil and gasoline.”

A Scotiabank report on global auto sales gives weight to Seco’s analysis.

The document, released in July, shows auto sales in places like Brazil, India and China are expected to drive world demand to new records.

Global car sales in the first half of 2008 advanced 1.5 percent, undercut by slowing Western economies and record oil prices.

But Russia, India, China and Brazil continue to post double-digit gains in automotive sales, according to the report.

“As small consumers compared to India and China, I don’t think it is going to have an impact (on gas prices) if we suddenly stopped driving and carpooled or took transit,” Seco added.  
On the flip side, Seco said expensive fuel has people thinking about oil consumption and that’s a good thing.  
Looking at it in terms of sustainability and the environment, cutting back on our dependence on fossil fuels may be better in the long run.

In the meantime, people will just have to cope with “gas pains” until we figure out a better idea.