«They’re doing it because they can,» says economist Marc Lee, who recommends the B.C. government step in.
Alberta’s oil industry is raking in “excess profits” by price-gouging B.C. customers, according to a new report by the Canadian Centre for Policy Alternatives.
Marc Lee, an economist at the CCPA and the author of the report, says: “Turn off the taps? Alberta already has Vancouver over a barrel,” and taxes aren’t to blame for record-high pump prices here — “Big Oil” in Alberta is.
Lee’s report found Vancouver motorists are paying oil-refiners 20-30 cents more per litre than are customers in Calgary and Toronto. They’re also paying far more than they did just a decade ago.
Suncor, Parkland Fuel and Imperial Oil, refiners that were specifically named by Lee, referred Postmedia News to the Canadian Fuels Association, an industry group to which all companies belong. Shell didn’t respond to a request for comment.
When asked about the price differences, Erin Brophy, a communications manager for the fuels association, said in an email that it was fundamentally about “supply-and-demand dynamics and taxation.” She linked to an association statement that explained why it doesn’t comment on gas prices.
Brophy also referred Postmedia to an issue statement the association produced in May 2018 regarding the high gas prices in Vancouver at the time. It said demand for gas in the Lower Mainland had “risen significantly” since 2014 at the same time that demand on space in the Trans Mountain pipeline had reduced the amount of refined products that were being sent. Those factors had increased reliance on imported fuel by rail and barge from the U.S., according to the 2018 statement. It also said Vancouver had higher rates of taxes on fuels than other North American jurisdictions.
Lee’s report examined the 55-cents-per-litre increase in pump prices that Vancouver residents have seen since April 2016. Of that figure, 6.3 cents could be attributed to tax increases, Lee found. Another 2.6 cents went to gas stations. The increased price of crude oil, which hits drivers across Canada similarly, accounted for another 28 cents. The rest, about 18 cents, came from increased refining margins, the report states.
Refining margins for Vancouver gas were less than 20 cents per litre as recently as about 10 years ago, according to the report. By mid-April that margin reached 55 cents. That compares with refining margins in Toronto and Calgary that in recent weeks have ranged from 18-32 cents, Lee found.
“We’ve seen this steady increase over time in the margin going to refineries,” Lee said.
Like the fuels association, Lee brought the story back to 2014, when, as he put it, oil prices were “really, really high,” then suddenly crashed. By early 2015 the prices were very low, but the price at the pump in Vancouver hadn’t moved “nearly as much as it should have given the drop in the price in crude,” he said.
“Basically what you have here is refiners stepping in and taking some of that drop as increased profits. And then over the last few years we’ve seen an increase in the margins that are going to refiners,” Lee said. “And they’re doing it because they can.”
Lee’s work relied on data from the Kent Group, a company that incidentally also produced a recent market analysis that the fuels association referred to in its response to Postmedia. That report included a similar explanation for high prices in Vancouver to the one offered by the association. But it also said it’s “less than clear” whether increased Trans Mountain pipeline capacity would relieve prices in Vancouver.
“The increased capacity of the expanded line will be used to transport primarily crude and not necessarily refined product, since there are already committed shippers (of crude oil) for virtually all of the proposed expanded capacity,” stated the Kent analysis.
For Lee, threats by Alberta’s incoming Premier Jason Kenney to “turn off” that province’s oil supply to B.C. ring hollow because piping fuel to B.C. is so profitable for those in the industry.
Lee argued that B.C. should regulate gasoline and diesel prices in the same way it does electricity and natural gas.
B.C. Premier John Horgan has previously suggested it could be an option to ask the B.C. Utilities Commission to look at regulating gasoline prices.
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