Wholesale gas, diesel cost reports expected to lower prices
The provincial government is forcing gasoline and diesel wholesalers to provide detailed cost reports as part of an effort to make the market more competitive and bring down prices.
Wholesalers buy oil, refine it into gasoline and diesel, then store it and ship it to a rack, where retailers collect the fuel — paying a “rack price.”
B.C. has four wholesalers — Parkland, Suncor, Imperial Oil and Shell — that act as an oligopoly, although because they control all the racks in the Lower Mainland they are considered a natural monopoly. There are almost 600 gas stations in the Lower Mainland that buy from these racks.
Last spring, in response to consumer complaints about soaring gas prices relative to the rest of North America, the British Columbia Utilities Commission investigated the gas market and found “a significant unexplained difference of approximately 13 cents per litre in wholesale gasoline prices between southern B.C. and its Pacific Northwest cost comparator.”
The BCUC inquiry panel also found “the wholesale market for gasoline in B.C. is not truly competitive with high market concentration levels, high barriers to entry, and the wholesaler’s ability to influence prices.
The action we are taking will help ensure industry is held publicly accountable for unexplained markups.
“The panel finds that the prices in the Metro Vancouver area are higher than would be expected under more competitive conditions. The higher price differential cannot be explained by economic theory or justified by known factors in the market.”
In a statement Friday, Minister of Energy, Mines and Petroleum Resources Bruce Ralston said the unexplained 13 cents per litre paid by consumers amounted to $490 million a year.
“For years, British Columbians have felt like they are getting gouged when they fill up at the pump,” Ralston said.
“With the new rules we are bringing in, oil and gas companies in the wholesale market will have to start making regular, mandatory reports to BCUC.
“By pulling back the curtain, the action we are taking will help ensure industry is held publicly accountable for unexplained markups and price increases.”
The new mandatory reporting requirements will start in November, using the Fuel Price Transparency Act that was passed last fall.
Wholesalers will have to provide detailed information on fuel imports, storage capacity, bulk sales and wholesale prices.
British Columbians buy roughly 5.2 billion litres of refined gasoline a year. The government has not made any announcements around the 34 cents in every dollar that it collects from fuel sales in B.C.