Steaming on fuel prices: Alberta's threats of inflicting pain on the pumps add "perfect storm" by B.C. gas costs

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The Lower Lower refinery, the Parkland facility in Burnaby, works well by industry standards, but cannot get closer to domestic demand.

Alana Paterson

Chris McDonald can't escape skyrocketing gas prices. As owner of the Vancouver Rush Courier, he is scoring 300 kilometers a day on his thirsty Chevy TrailBlazer. Gas prices have risen in the last six weeks to reach maximums, and now he will have to ask his customers to share the pain.

"We will have to increase our rates".

And forecasts require more pain than pumps.

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The Premier of Alberta Jason Kenney this week proclaimed a law that would allow her province to "turn off the taps" on gas shipments to British Columbia, intensifying the dispute over the expansion of the Trans Mountain pipeline and raising heat on BC Prime Minister John Horgan's government.

Mr. Horgan, who has vowed to make life more accessible to British Colombians, is already facing strong pressure to provide relief to motorists. Alberta supplies B.C.'s domestic fuel needs up to 80 percent. and there are no easy alternatives. The interruption of gas shipments would produce a severe blow to the economy of the B.C.

The BC liberal opposition says the government should abandon its opposition to the pipeline to deceive Mr. Kenney and cut off gas taxes for the startup.

"It's John Horgan's fault that we have the highest gas prices in North America," the BC liberals wrote on social media channels. They even bought billboards with a gritty picture of the Premier to reinforce the message that, if you're not satisfied with the price of the pumps, you should "blame John Horgan".

But there is only one reason to increase gas prices and there are no simple solutions.

"Right now on the west coast we have the perfect storm of problems," said Jason Parent, vice president of consulting at Kent Group Ltd., a Canadian consumer analysis company.

From the beginning of April, the steady rise in gas prices in some parts of the B.C. it can be attributed to a number of reasons, some of a seasonal or regulatory nature, but many are market-driven: demand is high and supply is limited due to the region's limited pipeline and refining capacity.

None of these should improve anytime soon.

Mr. Horgan asked his deputy minister, Don Wright, to explore regulatory options to curb what he describes as scandalously busting by gas companies. The Premier expressed his frustration at the fact that when his government increased the carbon tax by around one cent per liter on April 1, gas prices rose significantly in response.

Kent Group data shows that Vancouver drivers are paying far more to gas companies than most Canadians. The gross income collected by the refineries in the Vancouver market is 42.7 cents per liter, more than twice the Canadian average of 20.8 cents.

Mr. Horgan says the long-term answer is to have more refining capacity to meet the demand. It is a tough sale, to ask the industry to invest billions in new refining capacities when its government wants to freeze the amount of crude oil transported through the province.

In the short term, Mr. Wright is studying options that include the direction of the B.C. Commission for public services to monitor gas prices or impose extensive reporting requirements to ensure consumers know who is benefiting from the pumps – a measure similar to the disclosure provided in Washington State.

Alternatively, B.C. could offer discounts to consumers, while prices remain high, even if the price peaks are regional and more perceived in the Lower Mainland and in the communities of Vancouver Island.

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Or the province could reduce taxes that the government charges on fuel sales – a measure that is unlikely unless the government somehow manages to ensure that the difference is not swallowed up by the gas companies.

To evaluate the options, Mr. Wright needs to understand why – even without Alberta turning off the taps – prices have risen in some communities.

Here are the key factors:

Supply

By industry standards, the Lower Mainland's only refinery, the Burnland Parkland facility, works well, with 92% capacity. But it cannot come close to satisfying domestic demand. Parkland offers 55,000 barrels of oil per day and produces gasoline, diesel and aircraft fuel from here. (Husky's oil in Prince George, the only other B.C refinery, can process 12,000 barrels a day). But British Colombians consume 214,000 barrels of refined oil products a day.

Most of the province's supplies come from the Trans Mountain pipeline. About 10 percent comes from US refineries.

When the Alberta government threatened for the first time last year to stop shipping to B.C. in retaliation over the dispute over the oil pipeline, B.C. officials have suggested that their province will simply replace Alberta's fuel with Washington State gas.

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But this is not an option at this time: supply challenges in the Pacific Northwest have begun to raise gasoline wholesale prices in March.

"Nobody is immune," said Dan McTeague, senior oil analyst for GasBuddy.com. "What makes the situation a little more terrible in the Lower Mainland and in Vancouver Island is the reality that we don't produce enough fuel in our backyard to meet our domestic needs, so we constantly look to other markets for provide, and at this time the offer is narrow. It is the economy 101. "

Major existing and proposed Canadians

and US pipelines

Pipelines and Enbridge connections to

WE. Midwest / proposals

Kinder Morgan TMountain rans

Existing pipelines in eastern Canada

Proposals for conduct at WEast Coast

Proposed Pipeline a PADD III

THE GLOBE AND MAIL, SOURCE: CAPP

Major existing and proposed Canadians

and US pipelines

Enbridge pipelines e

connections with the United States.

Midwest / proposals

Proposed Pipeline a

the WEast Coast

Kinder Morgan

TMountain rans

Proposed conduct

to PADD III

Existing pipelines a

Eastern Canada

THE GLOBE AND MAIL, SOURCE: CAPP

Main existing and proposed Canadian and US oil pipelines

Proposed Pipeline a PADD III

Enbridge pipelines e

connections with the United States.

Midwest / proposals

Existing pipelines a

Eastern Canada

Proposed Pipeline a

the WEast Coast

Kinder Morgan TMountain rans

THE GLOBE AND MAIL, SOURCE: CAPP

Taxes

The prices at the pumps have jumped in B.C. April 1, when the government raised the carbon tax by 1.2 cents per liter.

"This is a small increase," said McTeague, but is only part of a much broader picture: "Vancouver is the highest tax jurisdiction in North America".

In the Vancouver area, the total provincial tax for one liter of gas is 34 cents. This includes almost nine cents for the carbon tax, but the largest share goes to pay for public transport: a withdrawal of 17 cents for TransLink, the transport authority. That tax means that Fort St. John residents do not end up paying Metro Vancouver transit projects such as the Broadway subway and the rapid transit into Surrey.

In the Victoria region, the transit fee is lower and the total tax is 29 cents per liter. In the rest of B.C., where there are fewer public transport services, the provincial tax burden is only 23 cents per liter.

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Tax rates for light petrol

Cents per liter

TYPE TAX VANCOUVER AREA VICTORIA AREA REST OF B.C.
Tax on dedicated fuel – TransLink 17 N / A N / A
Dedicated fuel tax – BC Transit (Victoria) N / A 5.5 N / A
Tax on dedicated fuels – BCTFA 6.75 6.75 6.75
Provincial fuel tax (general revenue) 1.75 7.75 7.75
Total 25.5 20 14.5
Carbon tax 8.89 8.89 8.89
Total provincial tax 34.39 28.89 23:39

Source: B.C. Ministry of Finance

Low carbon fuel standards

This week in the legislature, the B.C. The government has criticized the high premiums that Vancouver drivers pay to refineries. But part of that higher margin collected at Vancouver service stations includes the buried cost of the province's low-carbon fuel standards.

The requirement, imposed by the BC liberal government since 2010, has gradually decreased the average carbon intensity of fuels sold in the province, but has also gradually increased the cost of fuel throughout western Canada, as refineries adapt the their products to conform to the BC requirements

Mr. Parent of the Kent Group said it was a hidden tax: "There are compliance costs associated with this for the refinery. These costs are difficult to define because they are part of the refiners' price, but the prices of refined products increase in BC "

Fuel season

True – summer gas costs more than winter gas.

The winter fuel has more butane, an inexpensive additive. In both Canada and the United States, regulations limit the amount of butane in the mix for warmer temperatures because they are volatile, which makes summer gas more expensive. It is a cost that, of course, is passed on to consumers.

Seasonal guide

In three weeks, Canada and the United States will kick off the summer driving season over the weekend of May. And gas analysts say you can almost set your watch to the corresponding jump in gas prices. "Gas prices tend to rise in spring and summer, and this is linked to the increase in demand. More people are out driving. Therefore, greater demand with limited refining and supply capacity usually creates pressure on the upside on the price ", said Mr. Parent.

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At the beginning of April, Mr. Horgan hinted that relief could be possible by setting expectations that he would do something to lower gas prices. A month later, he says it's not easy.

"We must continue to work every day to make sure we leave no stone unturned to try to alleviate the pressure consumers are seeing right now," he told reporters this week. "But most analysts will tell you that it is a variety of factors, virtually all of them out of our control."

. (tagToTranslate) Vancouver Rush Courier (t) Gas prices (t) Alberta Premier Jason Kenney (t) Expansion of the Trans Mountain (t) B.C. pipeline Premier John Horgan (t) Don Wright (t) carbon tax (t) The Kent group (t) B.C. Utilities Commission (t) tax (t) gas (t) government (t) liter (t) cent (t) provinces

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