Pain at the pumps: A perfect storm
Taxes, gouging and market malfunction combine to put B.C. drivers in a gasoline vise
If you drive a gasoline-powered vehicle, chances are you are asking some hard questions as fuel prices reach record highs.
You are probably wondering why you have to empty your bank account to fill your tank. For instance, why do Albertans pay consistently less for gas, while charging British Columbians more for the same product from the same refineries?
Why can I cross the border and pay around $1.10 Canadian a litre just a few miles from Canadian stations that charge in the neighbourhood of $1.60? Couldn’t that cheap gas be sent north to our stations?
I wondered why the wholesale price of gas is 92.2 cents in B.C. when the same gas is 81.6 cents a litre in Calgary, according to Kent Group.
I wondered, too, why the difference in the price of wholesale gas compared to the price of crude oil — the “refining margin” — is more than 20-per-cent higher (about eight cents) in Vancouver than it is in Calgary, according to data from Natural Resources Canada.
The exact same market distortion is apparent in the difference between the retail price of gas and the wholesale price. The retail margin is more than 20-per-cent higher (about two cents) in Vancouver than Calgary.
The Canadian Association of Petroleum Producers suggested I call the Canadian Fuels Association. The CFA suggested I call an independent analyst, who was on vacation. So, I called another.
“The oil companies are gouging us,” said economist Robyn Allan. “There is no market reason that explains the price of gas in B.C.”
The Port of Vancouver is a net exporter of fuels, so supply isn’t an issue, she said. We are actually awash in gas.
“The cost of producing gasoline (at Parkland in Burnaby) and in Alberta should drive the price of gas in this market,” she said. “They closed the refineries in B.C. to produce oil more cheaply in Alberta.”
The problem is that B.C. doesn’t seem to benefit from the arrangement.
That gasoline comes to us through the Trans Mountain Pipeline from a small handful of companies that don’t appear to be competing on price in B.C., she said.
“If the market was functioning properly, cheaper gas would flow north from Washington and drive prices down,” she opined. “We don’t ever see that.”
The truth is that Washington’s refineries operate near capacity to satisfy existing customers, so there is precious little product to spare, according to industry consultant Michael Ervin of Kent Group.
If the gas won’t come to us, a great many people are willing to go south for a cheap tank. A bit of simple math puts the price of a litre of regular gas at about $1.10 Cdn in Washington, compared with $1.41 to $1.61 in B.C., according to Gasbuddy. com
So, why is gasoline such a bargain in Washington? The short answer is: taxes.
Our Cascadian cousins pay 44.5 cents in state tax and 18 cents in federal tax on a U.S. gallon of gas, or about 22 cents a litre in Canadian money.
In the Vancouver area, we pay a TransLink Tax (17 cents), Dedicated Motor Fuel Tax (6.75 cents), Provincial Motor Fuel Tax (1.75 cents), Carbon Tax (7.78 cents), Federal Excise Tax (10 cents), and the Goods and Services Tax (5 cents). Add a smidgen of tax on tax to the calculation and it comes to about 49 cents per litre.
Stripped of all taxes, the retail price of gas in Washington is a shade under 90 cents a litre, compared with about 91 cents to $1.12 in B.C., depending on where you live.