A New Tool for Transparency in Canadian Fuel Pricing
Conchur Brennan of Portland Fuel Canada explains some of the nuances of Canadian fuel pricing - and the gap in the market for a fuel analytics dashboard
A universal truth in shipping and logistics is that the distance between two locations is fixed. You can’t make Toronto any closer to Winnipeg, or the Port of Vancouver any closer to Yellowknife. The distances are fixed, so there’s really no way to save time or get a load from one place to the next. It’s really as simple as that.
So, if time can’t be saved, how can transportation companies at least save money and cut down the costs of getting from one fixed location to another? Fuel. But, here’s where things have traditionally gotten a lot less simple. Enter Portland Fuel.
We spoke to Conchur Brennan, General Manager of Portland Fuel Canada, about fuel pricing in Canada and the transparency gap in the marketplace.
Conchur Brennan
General Manager
Portland Fuel Canada
Portland Fuel, a company founded in the UK in 2009 and now operating a subsidiary out of Hamilton, Portland Fuel Canada, is out to add some predictability and simplicity to the way fuels are purchased and handled by shippers around the country with its new offering, Portland Pricing. Coming from Europe, the company brings a unique perspective into the way fuel, Diesel in particular, is sold and the nuances that make Canada unique when it comes to buying fuel.
Regional rack pricing
According to Conchur Brennan, complicating matters for Canadian fuel purchasers is the concept of regional rack pricing. The main difference, he explained, is that in Canada, compared to other countries, we have what's called regional rack pricing, and from coast to coast, there are about 65 racks. The price of fuel is based off the rack location, usually with a premium put on top, increasing fixed costs. Further complicating matters is what Brennan referred to as the “pricing differential” and the fact that North America’s fuel pricing is ultimately based on prices set in one location, New York.
The way pricing works in Canada overall is that the North American fuel process is based on the New York Harbour price. So, every litre of fuel starts life priced in New York, then everything beyond that is New York plus. So, by the time you get to the Toronto rack, for example, you’re paying plus five cents a litre. It’s what we call a pricing differential. At the moment, for example, the difference between New York and Toronto might be 7 or 8 cents a litre. Keep in mind that difference is constantly changing as well, based on multiple factors.
Fuel pricing in Canada is stagnant
Interestingly, that change in fuel prices is where Portland’s innovation in using data to help lower fuel costs comes into play. As an example, Brennan points out that the New York harbour price is updated constantly—every 10 seconds. Canadian rack pricing on the other hand, is set only once per day. The result? Canadian fuel prices are stagnant. What this means for Canadian buyers, is that if they’re stocking up on diesel, since the NY base price goes up or down every 10 seconds, there’s no way to know if the price they’re paying is higher than it should be.
A gap in the market
From Brennan’s perspective, this lack of “live pricing” opens a wide gap in the market Portland Fuels is hoping to fill. Namely, the fact that there is no way for buyers to know when to pull the trigger, when it comes time to stock up on fuel.
Currently in Canada, there is no market information that can help inform you as to when you should be buying your fuel. Recently, you know, we've seen prices go up by $0.25 a litre in the last three weeks, and in some days we've moved four cents a litre. So, if I were looking to buy a full load of diesel, should I be buying it now or should I be buying tomorrow? There’s no way to tell.
Brennan also points out that the problem is even worse for people buying on cardlock.
In Canada, especially on card lock, people are often given a weekly price. And, that weekly price is based on the average of the previous week. That means you're buying fuel based on the previous weeks average. So, by using [with Portland Pricing] come Thursday / Friday you’ll have an indication of what your price will be next week, allowing you to buy this week or wait until next week to purchase where possible. This could present sizable savings, for example if you’re buying 20,000 litres per week and let’s say the differential from last week is $0.05 a litre, that's a $1000 in price difference right there.
Portland’s opportunity and advantage: a dashboard for change
By applying their understanding of global fuel prices to the Canadian market, Portland’s data tools can help buyers start saving the money he’s talking about. The company’s recently released fuel dashboard offers a new level of transparency not seen in the Canadian market. That transparency, he explains, can lead to major savings when applied to ongoing fuel purchases.
For example, let’s say the market might have risen 6 cents a litre. [Using our tools] you're able to make a decision on that. So, on a full load of diesel, let’s say 50,000 litres, that's a $3000 difference. So, with the added transparency, the question becomes ‘Do we need to buy it tomorrow? Do we need to buy it today?’. People will now have an opportunity to look at the market and make informed decisions.
Portland’s new data analytic tools aim to slow that outflow of cash down.
If you’re interested in subscribing to Portland Pricing, CITT-Certified Logistics Professionals, CCLP Candidates (including learners!) and Affiliate Members are entitled to a special discount! Subscribe here, and if you’re entitled to a discount via CITT, reach out to Daniele at Dlippi@citt.ca for your checkout code!