Paradox's Blog is a hub for thought leadership in the areas of construction, engineering, project management, leadership, and business in the civil construction and geotechnical engineering industries.
Market Outlook - Canadian Fuel Industry
21 July 2021
What is going on in the petroleum industry?
There has been a steady rise in gasoline prices within Canada starting from January of 2021 to now. This surge is not expected to let up this summer; thus, we are on track to reach or exceed the record high average monthly fuel price we saw in mid-2018 of 135.9 cents per litre. This is a huge increase from the prices we were seeing in April of 2020 when Canada hit a record low for its monthly average fuel price of 79.5 cents per litre. Canada has not exceeded these record highs since before 2015 and have not exceeded these record lows since before 2004. This puts into perspective the huge deviation in gas prices that Canadians have experienced in the last 3 years alone. We can expect that this extra expense will hit hard in the coming months; especially for owners of construction companies as we continue through this construction season.
At the beginning of the COVID-19 pandemic, in March of 2020, the prices of gas plummeted. In comparison to 2019, the retail prices of gasoline decreased by 16.7% in 2020. This was, in part, due to the initiation of more drastic prevention methods for containing for the COVID-19 outbreak in Canada. More people began working from home and businesses began to limit customer capacity. The need for driving began to diminish and oil and gas companies paid the price. The industrial slow-downs, travel restrictions and the depressed need for gasoline during the pandemic caused a supply and demand imbalance within the industry.
In 2021, as the vaccine began being administered throughout Canada and the restrictions lifted, the demand for gasoline skyrocketed. This escalation was to be expected, as most Canadians are looking to escape the confinement of their homes and get back to normal life. This means more road trips and outings, not to mention the lifting of the working from home mandate which is causing more and more employees to drive to and from their workplace once again. Moreover, as of April 1st, the federal carbon tax increased by $10 per ton to $40 per ton in compliance with the national plan introduced by Trudeau. Both of these factors can account for the rise in the prices you pay at the pump and to heat your home. These high fuel prices can be expected to continue throughout the summer of 2021 and possibly into fall.
The increasing prices are creating tension for many business owners. Many companies starting large construction projects are seeing an increase in the cost of contracting third-party construction companies for their projects. These third-party companies must account for the elevated price of mobilizing their fleets and bringing in product to the construction site. The gasoline price increase is also impacting the average consumer as they take to the roads. In turn, consumers and companies are beginning to look and learn about alternatives to gasoline to fuel their vehicles due to the high variability of the oil and gas market.
Is hydrogen the future of the energy sector?
With the internal combustion engine ban in Canada in place for 2035, consumers will need to begin considering alternative options to petroleum products. One alternative Paradox believes to be leading others is fuel cell technology powered by hydrogen. Hydrogen vehicles and engines have the potential to be better performers in the winter than their electric counterparts, which is crucial in Canada’s climate. Filling a hydrogen vehicle is also done the same as gasoline vehicles, meaning gas stations will not look any different and consumers will not need to worry about long charge times.
Hydrogen powered vehicles come with a list of advantages. Notably, the only emissions are water as a biproduct of the hydrogen and oxygen electrolysis reaction to power the engine. Other benefits include: a smoother ride as there is no transmission, no battery required to turn over the engine, and the ability to hold more fuel and go longer distances between ‘fill-ups’.
With any alternative to petroleum there has been expected push back within the industry. Serial entrepreneur, Elon Musk, replied to one tweet comparing energy loss between hydrogen and electric energy saying: “fuel cells = fool sells”
Even amidst criticism, hydrogen fuel cells have remained relevant, and many companies continue to support and develop towards a hydrogen future. Furthermore, KPMG’s latest automotive survey revealed that the majority of interviewed executives agree that by 2030 the largest share of vehicles will not be powered by an internal combustion engine, rather it will be a blend of alternatives such as hydrogen and electric. Thus, understanding hydrogen technology and preparing for a world where petroleum run engines are obsolete remains imperative for all industries.
Continued investment by companies like Air Products into hydrogen energy, further support the notion that hydrogen will play an integral role into Canada’s future energy sector.
Who is Air Products?
Air products is a world-leading industrial gas company that has become a proven leader in hydrogen fuel production. In the greater Edmonton area, Alberta, Air Products currently operates three world-scale hydrogen production facilities and a 55-kilometre hydrogen pipeline network. Air Products is the leader in hydrogen and gas production across Canada and continues to innovate and develop new technologies in support of clean renewable energy production. According to Air Products, Alberta remains positioned to be a leader in hydrogen production due to the: large natural gas reserves, ideal geology for carbon storage, and existing required infrastructure.
Air Products has approved a $1.3 billion dollar net-zero hydrogen production and liquefaction facility expected to be complete by 2024. The plant will be located near Fort Saskatchewan, Alberta. With government and public backing, Air Products is set to be a major contributor in leading Alberta into its position as a hydrogen and clean energy producer. On top of the ability to produce hydrogen, the plant will release 95% of the carbon dioxide back into the ground and the remaining 5% will be offset by hydrogen-fueled electricity, meaning the plant itself will be emission free.
Canada’s gas prices continue to soar, in Alberta at the time of writing this article, gas prices have reached 139.9 cents per litre. The current prices may be a ‘knee-jerk’ reaction by oil & gas companies to the shifting economic landscape following the novel coronavirus. However, it forces forward thinking companies like Paradox to better understand alternatives and begin to evaluate the future of our energy sector. One day earthworks and construction fleets such as Paradox's may run on hydrogen.
It is a long established fact that a reader will be distracted by the readable content of a page when looking at its layout.