Fuel frenzy grips globe as prices climb

Experts downplay fears of crisis amid panic buying, street protests against hikes

Around the world, reactions to fuel prices have ranged from panic buying and traffic-clogging queues to protests so violent they’ve prompted police to fire tear gas and water cannons.

Here in Toronto, some drivers were forced to shell out an extra 3.6 cents a litre Wednesday, thanks to an overnight price hike at the pumps.

Is this normal volatility that’s fuelling violence, panic and frustration worldwide — the usual price jump before the busy summer months in North America, say — or is something larger at play? Are we headed for a fuel crisis?

The short answer, perhaps not surprisingly, is that there’s no short answer, according to Daniel Yergin, a Pulitzer Prize-winning author and energy expert. His new book, The Quest: Energy, Security, and the Remaking of the Modern World, explores the global struggle for control of oil.

Despite accusations of corporate greed, one expert says that with competition among gas companies so tight, ‘there’s very little room for price gouging.’

There are two significant factors at play, he told the Star. The first is that emerging markets, such as China and India, now drive the oil market instead of industrial countries.

Then there’s heightened tensions between Iran and its rivals in the United States and Europe — something Yergin attributes to a November United Nations report warning the Middle Eastern country was assembling nuclear weapons capabilities.

Since that report, world oil prices have jumped a whopping 20 per cent, Yergin said. Attempts are being made to squeeze Iranian oil out of the market; the recent European Union embargo on Iranian oil is one of the most significant examples.

Iran has responded with threats to close the Strait of Hormuz at the mouth of the Persian Gulf, the route for one-fifth of global oil.

“It is a tight market. The question is, if Iranian oil is squeezed out, what will replace it?” said Yergin.

Because of these two factors, “we’re kind of in a balancing period right now,” Yergin said.

The market will also change significantly in the next decade, he added, due to increasing oil production in Canada, the U.S. and Brazil.

“It is a tight market. The question is, if Iranian oil is squeezed out, what will replace it?” DANIEL YERGIN PULITZER PRIZE-WINNING AUTHOR AND ENERGY EXPERT

Andrew Miall, professor of geology at the University of Toronto and an expert in gas and oil politics, doesn’t believe recent price hikes, protests or panic buying suggest major developments in the oil market.

He says concerns about reaching peak oil — when oil is used up faster than new reserves are found — are premature.

“We anticipate that the peak will arrive some time later this century,” he said.

Addressing the hike in gas prices, Miall said any number of factors can affect costs.

Oil prices are determined by everything from the speculative wholesale price determined on the exchange market, to a tornado or a hurricane, to a breakdown at a particular refinery.

From there, these factors take time to affect pricing, he said.

“The blip in prices we’re seeing now could be the result of something that happened weeks ago or months ago or multiple things adding up,” he said.

Contrary to accusations of “corporate greed” often made when costs at the pump go up, he said competition between gas companies is so tight that “there’s very little room for price gouging.”

“Essentially, we have a market that’s working the way it’s supposed to work,” he said. “It’s competitive, and price rises and falls according to market conditions, and that’s what we’re supposed to believe is a good thing.” With files from Star wire services