Why are B.C. gas prices surging when the province gets most of its gas from local refineries ?

Gasoline is made from crude oil, the sky-high cost of which is set at a global level

The price of gasoline at the retail level has hit record highs across the country this week, with drivers in British Columbia seeing prices soar past $2.10 per litre over the weekend. Economists, fuel experts and politicians have agreed prices are rising because of Russia’s invasion of Ukraine. But B.C. gets most of its gasoline from Burnaby, Edmonton and Washington state — so why does supply from Russia matter?

Here’s an explanation.

First off, why is gas so expensive? Gasoline is made from crude oil, the cost of which is determined globally. The cost is influenced by international supply and demand or geopolitical events.

Crude prices were already high before Russia invaded Ukraine but now, there’s even more uncertainty around long-term supply since Russia is one of the largest producers of oil and gas in the world.

“It freaks you out as a buyer,” said Vijay Muralidharan, a senior consultant at energy analytics firm Kalibrate. “Even if it doesn’t happen, there’s paranoia, so you bid up to make sure your supply is there.” The price per barrel of crude oil soared this week to levels not seen since 2014, hitting $130 US per barrel Monday before dropping closer to $120. But B.C. gets most of its oil from nearby refineries. Why does losing Russian supply matter? Most of the gasoline in B.C. comes from refineries in Burnaby, Edmonton and Washington state, but the selling price of the oil going into those refineries is still decided by the global market.

“We have one price of world oil, and that basically is the price we cannot escape from. So no matter how much we wish the prices are local, they’re not,” said Werner Antweiler, a professor at UBC’s Sauder School of Business.Oil producers sell their products to refineries competitively, so if prices are up internationally, they’ll be up locally. Marc Lee, senior economist with the Canadian Centre for Policy Alternatives, said the cost is being passed onto the consumer. “Companies are making massive, massive profits,” he told CBC last week.

Why not remove carbon taxes? There are four main costs that make up the price of regular gasoline: • The price of crude oil. • Refining costs. • Distribution and marketing costs.

• Taxes, including federal, provincial and municipal taxes. The cost of crude oil is the highest of those four costs, usually determining roughly half of the retail price of gasoline. Removing taxes would lower the price of gas, but would do nothing to address the crude oil problem. “Increasing the carbon tax as planned in April by one cent per litre, that pales in comparison to the 20 or 30 cents a litre that is essentially the Putin tax that’s coming from the invasion of Ukraine by Russia,” said Antweiler.