Weak links in the supply chain
When I was a kid in Halifax and the wind was just right, some mornings, I’d get a tang of the Dartmouth oil refinery. Not all the time, just on warm, damp, grey days when the wind was backing away from its usual direction.
When the wind was that way and the sky smelled like spilled oil, people in my neighbourhood used to use the old line about paper mills: it may be a bad smell, but it’s the smell of money.
Money, because people were working. Money, because it was the type of manufacturing that helped not only oil workers, but industrial equipment suppliers, local tradespeople and service industries. That refinery, like many smaller refineries, wasn’t cost-effective and shut down in 2013, and Nova Scotians now depend on tank farms and the long-distance delivery of gasoline by tankers. (In the process, it was estimated that 200 workers and 200 contractors lost jobs at the refinery, which was over 90 years old.)
It was part of a broader trend — between the 1970s and 2012, the number of refineries in the country dropped from 40 to just 19.
I thought about that this weekend when news broke about the sudden and serious gasoline shortage in Nova Scotia. Scores of gas stations across the province were left without fuel after two tankers showed up with fuel that was unsuitable for the Canadian market and another tanker was late; at least, that’s the most persuasive of the several versions of what caused the shortage.
Welcome to the perils of being at the end of the supply chain. When and if that chain breaks, there isn’t a safety net.
The bottom line? If you decide to stop making a product locally, you run the risk that it might not make it to where you need it, when you need it. Shed local production in favour of long transportation routes, even if it’s cheaper, and you leave yourself at the mercy of those routes.
It’s a lesson that’s familiar in Newfoundland and Labrador. The island portion of the province used to be self-sustaining in root crops like potato and turnip. Cabbage, also. But the provincial government closed down co-operative cold storage facilities and supermarkets began to import root crops from cheaper, distant markets.
The result is that even the slightest interruptions in the Gulf of St. Lawrence ferry and transport system is reflected on grocery store shelves almost immediately with shortages of pro- duce. Meats — pork and beef, because the island still has a major chicken producer — follow quickly.
Some argue that the province has only a few days’ worth of food supply. While some people talk about food security, the simple fact is that Newfoundland doesn’t really have any. Labrador is equally at the mercy of shipping routes, but with even shorter shipping seasons.
What’s especially interesting about the Nova Scotia case, however, is the fact that many people have no time for the official explanations for the shortage. With gas prices falling, consumers questioned whether there’s a conspiracy to somehow avoid giving them a break.
And that conspiracy fear demonstrates how quickly price is used as the sole determinant of value.
Sometimes, there are actually reasons for paying more.
Cheaper isn’t always better, especially if it means long-distance travel for goods.
If you make all of your decisions based on what’s cheapest without regard for the hurdles involved, you have to be ready for interruptions. You get what you pay for.
Gas wholesalers in Nova Scotia have been pretty blunt: it’s going to happen again. They are especially concerned about the potential for shipping interruptions during hurricane season.
The only thing that’s more expected than conspiracy theories? The idea that the government should step in and immediately fix things. Good luck with that. Governments apparently can’t even keep a potato cold storage facility open, let alone run a gasoline tank farm.