Evidence of meeting #43 for Natural Resources in the 41st Parliament, 2nd session. (The original version is on Parliament’s site, as are the minutes.) The winning word was winter.
A recording is available from Parliament.
Chief Economist, National Energy Board
I don't have that number off the top of my head. I think for both—and Darren might be able to correct me on this—the total consumption that winter went up 20% to 25% above the previous winter.
Director, Energy Markets Team and Acting Director, Energy Trade Team, National Energy Board
I have a couple of points. The agricultural demand in the U.S., during 2013, was estimated to be as much as five times greater than it was in 2012, so that was a significant factor. Going by memory, I believe that in the propane report, it was noted that some suppliers saw a demand increase of as much as 50% for home heating.
December 9th, 2014 / 11:30 a.m.
Conservative
Bradley Trost Conservative Saskatoon—Humboldt, SK
Thank you, Mr. Chair.
One of the things I am wondering about, listening to this, is people talking about how rare the event was last winter as far as price spikes and so forth. Can someone tell me—I guess Natural Resources Canada will take the first crack at it—how rare this was? Have we seen price spikes like this before?
Someone said 1% of Canadians use propane for heating. I suspect my constituency is well below that average. Is there something comparable to this? Is this, in real dollar values, the highest the price of propane has been? Has it been higher than this in the past? How rare is “rare”? When have we had something similar to this?
Mr. Hubbard.
Director General, Petroleum Resources Branch, Energy Sector, Department of Natural Resources
I'll begin, and maybe I'll defer a little bit to my colleagues at the National Energy Board with regard to some of their research on the markets as well.
Propane markets are typically volatile, given the seasonal demand for propane and given the kind of constant production levels that we see. Because propane is linked to natural gas production, it is produced at a steady rate year-round. When we do see big demand increases, especially unanticipated demand increases, we're going to see price responses in terms of ensuring that adequate supplies are available to consumers.
A key balancing factor in all of this is inventory levels.
Conservative
Bradley Trost Conservative Saskatoon—Humboldt, SK
I get that, but I'm asking how often. Has it ever been this high? If you don't have the numbers, maybe we can get them later. Maybe the National Energy Board.... Has it ever, in real dollars or any dollar value, been this high before, or has it spiked past this?
Director General, Petroleum Resources Branch, Energy Sector, Department of Natural Resources
In real terms, prices last winter were the highest prices that we have ever experienced for propane markets. But in terms of percentage increases, we have seen increases in propane prices in comparable levels in previous years. In 2000-01 there was a significant increase.
Conservative
Bradley Trost Conservative Saskatoon—Humboldt, SK
Does anyone else wish to answer? My time is burning away here.
Director, Energy Markets Team and Acting Director, Energy Trade Team, National Energy Board
Yes, there's table 4.1 in the report. As Mr. Hubbard alluded to, we saw similar per cent increases, actually slightly higher, in prior years.
In terms of actual cents per litre, looking at Sarnia prices, these were the highest that we've seen. If you adjust to current dollars, we did get probably about 60¢ back in 2000 if you account for inflation, but these were higher.
Conservative
Bradley Trost Conservative Saskatoon—Humboldt, SK
It's maybe once in every 10 or 15 years based on past history, if we account for inflation.
It's been said that supply is constantly growing with natural gas production growing in the U.S., but what about demand? Someone said earlier that only 9% of propane consumed in Canada is for home heating.
What is the demand for propane? Is it going up, is it fairly steady? Every supply and demand curve does have those two sides. Could someone tell me if the demand for propane is going up? If so, why? If not, why not?
Conservative
Director General, Petroleum Resources Branch, Energy Sector, Department of Natural Resources
I have the statistics in front of me, but maybe....
Darren, do you have this?
Conservative
Chief Economist, National Energy Board
Every couple of years we do our forecast out to 2035. When we looked at our last one, which was in 2013, we were projecting steady growth in propane demand in Canada over time—
Chief Economist, National Energy Board
—as population and economic activity expanded growth in propane markets. It's not a rapid thing; it's just a slow and steady growth.
Conservative
Bradley Trost Conservative Saskatoon—Humboldt, SK
To give a quick, final wrap-up, 9% is used by consumers. Who tend to be the other major consumers in Canada, if not residential homes? What industries tend to be the most dominant users of this fuel?
Chief Economist, National Energy Board
We have a graph in the report that shows who the consumers are. Darren is just flipping to it. It's agricultural use, industrial use....
Director, Energy Markets Team and Acting Director, Energy Trade Team, National Energy Board
Historically, industrial use, including petrochemicals, has been a significant source of Canadian demand.
A significant factor in the market is that petrochemical producers have a decent amount of flexibility in what feedstock they use, and lately, just because of relative prices of different NGLs, they have been shifting away from propane a little bit.
The numbers show that industrial demand is about 40%, commercial about 20%. Then, when they break out petrochemical non-energy demand, it is about one-fifth of Canadian demand. Of course, one factor is residential. Although about 9%, it is heavily weighted to the wintertime, so it would be a larger share during the cold periods.
Chief Economist, National Energy Board
Agricultural is at 4% and transportation is at 6%, so transportation is another reasonably sizeable sector.
Conservative
The Chair Conservative Leon Benoit
Thank you, Mr. Trost.
We go now to Mr. Bevington for up to five minutes.
Go ahead, please.
NDP
Dennis Bevington NDP Northwest Territories, NT
Thank you, Mr. Chair.
Thanks to the witnesses for coming back here again today.
Is propane considered a manufactured product in Canada? Does it fall under the designation of manufactured product?
Director General, Petroleum Resources Branch, Energy Sector, Department of Natural Resources
Do you mean for tax purposes and treatment? I'm not 100%—