To provide added flexibility to the distribution of petroleum products, refiners and marketers maintain inventories of the various products in strategic locations throughout the distribution chain. If supplies of imported or domestic crude oil were interrupted for any reason, or if the product distribution system failed, companies would rely on commercial inventories to meet short-term needs while alternate arrangements were being made.
Canadian crude oil and petroleum product inventories have been relatively stable for the last five years. Inventory levels for some products, such as gasoline and furnace oil, fluctuate significantly over the year. Demand for these products is very seasonal and at its peak can exceed the production capacity of refineries. Therefore, refiners need to anticipate the peak consumption periods by building inventories in advance. Gasoline inventories increase during the first quarter of the year and are used during the summer months to supplement refinery production. Furnace oil stocks grow during the fall and are drawn during the coldest months of winter when demand is at its highest level.
Refiners also build up inventories of all products in advance of scheduled refinery maintenance (called turnarounds). Turnarounds can vary in frequency from annually to once every few years and sometimes require the refinery to be completely shut down for a period of several weeks. Refiners anticipate this by building up product stocks that can be used during the turnaround.
Refiners´ crude oil inventories fluctuate over a very narrow band and are less seasonal than product stocks. There are significant regional variations in crude oil stocks, with refiners in the West, who run domestic crude oil maintaining about 5-7 days of oil, and refiners in eastern Canada who run imported crude oil averaging 15-20 days.