Twin the pipeline or high prices will stay: expert
Blame for near-record gas prices in the Vancouver area rests with a chronic supply shortage made worse by concurrent maintenance work on a Burnaby refinery and gas infrastructure in Washington state, one industry expert says.
Half of the region’s fuel supply comes from those sources, with the remainder making its way from Alberta through Kinder Morgan’s Trans Mountain pipeline, said Dan McTeague of the online gas price watchdog GasBuddy. When asked what could be done to improve the region’s fuel supply, McTeague said twinning the line could be the only viable option — short of knocking on the doors of American suppliers.
“I have no skin in the game,” McTeague said of the ongoing pipeline debate, noting that he lives in Ontario and is known for critical takes on the oil industry, including calling some of its plays “monopolistic.”
“I see prices that are completely and utterly out of whack … and it’s only because there’s a severe shortage.”
From McTeague’s perspective, neither shipping additional gas by boat nor delivering it via the already overstretched rail system were good options to boost local supply, and it was unlikely a new local refinery would be feasible.
Meanwhile, Alberta has the refineries, the capacity and the will to send a lot more refined gas to Vancouver, and a twinned pipeline could drop local gas prices dramatically, he said. The longer the project is delayed, the longer the high prices will stick around, he said.
A range of crude oils and refined products are transported in batches through Kinder Morgan’s pipeline, and over the past several years about 15 per cent of the throughput was refined products, the company said.
“We anticipate that refined products will continue with the expansion similar to historic levels but that could increase depending on market demand. This also applies for crude supply to local B.C. and Washington state refineries,” the company said in a written statement. It added that the majority of the expansion capacity would be for export off the dock.
In McTeague’s estimate, there is no place in North America that has as dire a supply problem as does the Vancouver region, and it also happens to have the highest gas prices.
Those prices are set to increase by another five cents per litre starting next month due to a bump in the carbon tax and the annual shift to summer-blend gasoline, McTeague said. Unless something changes, that could push Vancouver prices well past the 155.7-cents-per-litre record set in June 2014 and into $1.60 territory, he said. But McTeague said he believes that record could fall as early as this week. Prices started to soar partway through a planned multiweek shutdown of Burnaby ’s Parkland refinery.
During scheduled maintenance at the refinery, gas prices in Vancouver can spike by as much as 20 cents. Then an announcement came Friday that the Olympic pipeline that distributes gas throughout Washington and Oregon would be taken off-line for four or five days.
The maintenance work comes amid an ongoing political battle between Victoria and Edmonton over Kinder Morgan’s Trans Mountain project. Alberta’s recent speech from the throne included a threat that the province could cut B.C.’s fuel supply “owing to extreme and illegal actions on the part of the B.C. government to stop the pipeline.” McTeague has forecasted that could cause Lower Mainland gas prices to spike above $2 per litre.
Such a move would be bad news for Alberta producers and “absolutely devastating ” for Vancouver and surrounding areas, he said.
In other parts of the country on Monday, the average price for gas was just under $1.14 a litre in Edmonton, about $1.25 in Toronto and around $1.12 in Halifax.