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Oil prices are down – so why are gasoline prices skyrocketing across Canada?SEDI News

The price of a barrel of oil has fallen by about 20 percent in the past month, a situation that would ordinarily reduce the price for consumers when they fill up their cars. But the imbalance between supply and demand has caused pump prices to move in the opposite direction, and the impact on Canadian drivers has been dramatic.

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On a day when the benchmark price of a barrel of oil fell by nearly a dollar, gasoline prices skyrocketed in parts of the country Thursday, with Thunder Bay seeing an average price jump of 20 cents a liter, and Edmonton and Calgary leading the way. The same amount on Friday – despite oil prices falling another 50 cents.

The pain is currently felt most acutely in British Columbia, however, where the average price of a liter of gasoline is $2.39. That’s the highest average price on record for any jurisdiction in North America.

While a lot goes into the price drivers pay at the pump, the main culprit right now in BC is the shutdown of one of the region’s major refineries, which has reduced the supply of gasoline. But demand from drivers has remained stagnant, driving up prices for what’s available.

Refinery shutdown

The Phillips 66 refinery in Ferndale, Wash., shut down for maintenance earlier this month, taking about 65,000 barrels of gasoline offline a day.

“BC and Vancouver import every last barrel of gasoline and diesel [that] region of the United States,” said Vijay Muralidharan, energy analyst at R Cube Economic Consulting Inc. “When refining stops, the supply of gasoline stops.”

According to the US Energy Information Administration, gasoline markets in North America are broadly divided into five zones, known as Petroleum Administration for Defense Districts (PADD). Because supplies are limited but demand is strong in the PADD-5 district that includes British Columbia, fuel from the other four regions is moving in to meet that demand — and driving up prices everywhere.

“You have to compete for that limited barrel,” Muralidharan said. “So whoever pays the highest price wins the product.”

Washington state’s refinery isn’t the only one offline right now. A refinery in Toledo, Ohio, shut down due to fire, and it’s not expected to return to full capacity until 2023, so those spread-out shutdowns are also affecting prices across the United States.

“I don’t know that I’ve ever seen such a wide range of price behaviors in my career,” said GasBuddy.com analyst Patrick De Haan.

“Several unexpected refinery disruptions, including fires and routine maintenance, apparently all in a short period of time, have caused wholesale gas prices to rise in areas of the West Coast, Great Lakes and Plains states — and may continue to rise in some of those areas. As far as the issues “Look for prices to go up another 25-75 cents per gallon or more until that’s done,” he said this week.

Those problems span across the United States and spread north of the border.

‘The market is very tight’

Prices in oil-rich Alberta are always lower than in other parts of the country, but pump prices in the province’s two largest cities rose from below $1.50 a liter on Thursday to more than $1.60 on Friday.

Prices in Alberta have risen about 10 percent in the past week versus about 20 percent in B.C. The jump in Thunder Bay is a direct result because “most of the gasoline goes directly from Edmonton to Thunder Bay by pipeline,” Paul Pascoe said. Calibrate Energy Advisor. “In terms of the magnitude of the price change in Thunder Bay, it’s exactly where it should be.”

It also points to another reason for rising gas prices: the supply of ethanol. Many US states and provinces require that retail gasoline be blended with anywhere between 5 and 15 percent ethanol, with supplies falling by seven percent last week. “If that is to continue, the mix components are also increasing,” he said.

He said he doesn’t expect drivers to see any relief until the long Thanksgiving holiday weekend, but the market is still vulnerable to any general slowdown on the supply side. “It’s just that, the market is very tight on refining capacity,” he said.

Joel Scott of Vancouver says he’s considering buying an electric vehicle because of the environmental and financial toll of using so much gasoline. (CBC)

On the streets of Vancouver Thursday, Daniel Mihaichuk said it’s hard to ignore the price drivers pay at the pump. “Compared to the rest of the world, it seems like it’s significantly higher here,” he told CBC News.

Driver Joel Scott said he needs a pickup truck for work, but plans to buy an electric version as soon as he can afford it. “We need to drive less,” he said, adding that the reasons are not just financial. Last year’s floods during Atmospheric River were an eye-opener for him, he said.

“Climate change, you can absolutely say we’re being affected by it,” he said.

Hurricanes Fiona and Ian appear to have bypassed most of the oil infrastructure, but gasoline deliveries and supplies are still experiencing uncertainty, said Christine D’Arbelles, CAA’s senior director of public affairs.

“Storms can affect gas prices,” she said. “Because where the gas is coming from is a little different across the country, it could mean one province is feeling it a little more than another.”

See | Demand for electric vehicles has increased:

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Gas tax relief has expired

When prices spiked earlier this year, several provinces temporarily cut gasoline taxes to give consumers some relief at the pump. Those cuts are due to expire soon, which will be another factor driving up prices.

Alberta’s fuel tax is normally 13 cents a liter but the province lowered that figure to zero earlier this year during the recession. From tomorrow, however, the province will reintroduce a tax of 4.5 cents per litre.

In Ontario, the gas tax was cut from 14.7 cents to nine cents per liter on July 1, but is set to expire on December 31.

Victor Valens, senior vice president of natural resources and pipelines at DBRS Morningstar, said currency issues are also a factor. Oil is priced in US dollars, and like most other currencies, the loonie has been losing ground against the US dollar for weeks now.

“People are being squeezed from all sides,” he said.