Gas prices are rising sharply in Metro Vancouver and beleaguered motorists already reeling from price hikes in just about every area of life due to COVID-19 now face the prospect of $1.70 per litre at the pump by this summer.
Just what is going on?
The high price of gas in British Columbia is a fascinating story of greedy oil companies, hypocritical governments and fickle consumers that ultimately get screwed every time they pull up at their local gas station.
- See also:
Much of the shady world of gasoline pricing remains shrouded in mystery, due to the profits being raked in by a small handful of refiners, importers, wholesalers and retailers who would prefer you never find out exactly how the system works.
The BC government, under immense pressure to do something about skyrocketing prices in 2019, passed legislation to force oil and gas companies to hand over their most confidential data on where they get gasoline supply, how much it costs, and how much they mark it up to sell it to you.
It was supposed to all be sent to the independent BC Utilities Commission, which would start publishing it online and lift the lid on how much you get gouged at the pump.
That never happened.
While the rest of us have been fighting COVID-19 the past few months, the oil and gas sector and its small army of lawyers have been fighting a rear-guard attack against the government law to make sure that sensitive data never sees the light of day.
Proceedings in that battle started Monday and are slated to go through March.
Not a competitive market
First, a crash course in BC’s oil and gas sector.
It’s not a truly competitive market. A small number of companies own most of the supply and retail outlets, which makes it what’s called an oligopoly. That’s why all the gas stations seem to magically raise their prices to the same rate, at the same time, while you find yourself racing across town to look for the one outlet that is a few minutes behind on the new pricing.
To get technical, the price of gas in BC is set by figuring out the most expensive five per cent of the province’s supply from Seattle, called the Pacific Northwest Spot Price.
Gas companies make a profit by bringing in gas from anywhere they can for cheaper than this price – often Alberta – and then selling it at the higher spot price, according to a comprehensive report into the industry by the BC Utilities Commission in 2019.
The companies also bump their prices based on the cost of transportation, currency exchange, inflation, fuel standards and other things. Governments add on provincial and federal taxes, including BC’s carbon tax. And voila, your price at the pump.
Except. Hold on.
The 2019 study into BC gas also found a mysterious 10 to 13 cents per litre added onto gas prices here that could not be explained.
Doesn’t sound like a lot. But every one cent added to gas prices means $37 million paid by BC motorists annually.
“A gouge on local drivers which translates into hundreds of millions of dollars out of the pockets of the travelling public,” Premier John Horgan called it in November 2019 when the mysterious markup was revealed.
“Why are we paying 13 cents a litre more than anyone else in the country?” he asked.
One major reason BC’s prices are so high is that the province doesn’t refine enough gasoline here to meet its needs, meaning the companies import it from our American and Albertan neighbours, who profit nicely off our dependence.
BC has two refineries, a small one in the north and a larger Parkland Refinery in Burnaby. Neither come anywhere close to producing enough gasoline to meet BC’s needs.
So the bulk of BC’s gas comes from Alberta through the TransMountain pipeline. Yes, that pipeline – the one that has caused all the protests in recent years over a plan to twin its capacity.
The 2019 commission study found that diluted bitumen shipments in the existing TransMountain pipeline were crowding out gasoline, leaving BC without enough gas supply to meet demand and pushing prices up that way as well. Pipeline priority is controlled by the federal government.
“We need more gasoline, we need less diluted bitumen – that will not move your automobile, but gasoline will,” Horgan said in 2019.
But he didn’t say it very loudly.
Because importing more gasoline via pipeline from Alberta is not particularly popular among environmentally-conscious urban Metro Vancouver voters who are trying to tackle climate change and reduce the use of automobiles.
Many of those eco-focused voters are New Democrats. Horgan doesn’t want to tick them off.
Undoubtedly, some of the same motorists complaining about the rising price of gas are also opposed to expanding the pipeline that would bring more gas, and potentially lower prices.
In fact, the Horgan government itself opposes twinning the TransMountain pipeline, even as he publicly calls for more gasoline to be shipped through that same pipeline. Wrap your head around that one.
The politics of gas prices
That’s why gasoline pricing is wrapped up in a political conundrum for the governing NDP.
Horgan has proceeded very carefully on the gasoline file. He’s expressed just enough outrage to be populist, just enough opposition to pipelines to be environmental, and just enough wilful political blindness to avoid getting to the root of the problem and upsetting the whole apple cart of Metro Vancouver votes.
He’s also been a shrewd operator. When he asked the independent commission to investigate gas pricing in 2019, he barred it from examining the extent to which taxes – which add almost 50 cents per litre in Metro Vancouver – push up the price.
It’s also why the NDP’s 2019 law would force gas companies to be transparent on their prices – but not necessarily do anything to lower those prices or regulate the market.
The hope was that by pulling back the curtain on how much the companies gouge drivers would outrage the public and force the companies to change their predatory ways.
Energy Minister Bruce Ralston described it this way: “This legislation brings us greater transparency at the gas pumps and sends a message to the oil and gas companies that the days of setting your gas prices in secrecy are coming to an end.”
The fight to keep gas pricing secret
Which brings us back to 2021.
This was supposed to be the clearinghouse for all the secret data the gas companies didn’t want you to see, starting last year.
But like vampires, they recoiled from the sunlight.
The first to go on the offensive was Parkland, which owns the Burnaby refinery as well as retail outlets like Esso and Chevron. It balked at the idea of having to turn over all its confidential price and supply info, and demanded the commission keep that data confidential while only giving the public an anonymized and aggregated version so nobody could in any way calculate what the company was actually doing.
“There would be considerable commercial harm to Parkland through BCUC disclosure of its pricing, cost, and other sensitive competitive information: it could, for example, be used by a competitor to gain market share at the company’s expense or be unfairly leveraged by a counterparty in contractual negotiations,” the company wrote in September.
Parkland formally challenged the commission, kickstarting a hearing that began virtually Monday.
BC’s major oil and gas companies quickly rallied to the defence of Parkland.
Suncor, which runs 229 Petro-Canada stations: “Suncor supports Parkland’s application.”
7-Eleven, with 124 retail locations: “7-Eleven shares the caution of Parkland and wants to ensure that any published anonymized data not reveal indirectly or through back-calculation the confidential information of market participants.”
Ditto Husky and Imperial Oil.
Even your friendly neighbourhood Co-Op gasoline stores banded their 64 B.C. retail outlets together to fight to keep its pricing data confidential.
Gas companies as the easy villains
The BC government, which remains balanced on a political knife’s-edge between angry drivers and angry urban environmentalists, is actually quite pleased that the gas companies challenged the release of the data.
It gives the public an easy villain to attack, instead of demanding politicians make difficult choices about gas imports and pipelines that might lead to actual solutions.
“Our government is disappointed that oil companies are delaying and challenging BC’s independent energy watchdog, the BCUC, when it comes to what’s behind gas prices in our province,” Energy Minister Ralston said in a statement to Daily Hive Urbanized this week.
“British Columbians want transparency and accountability when it comes to gas prices. Especially after the BCUC’s investigation found that BC drivers are paying significant and unexplained premiums of up to 13 cents per litre at the pump.
“We brought in new legislation requiring big oil and gas companies to report to the BCUC on gas prices. It’s unfortunate that these companies are now challenging what information the BCUC can make public.
“We are hopeful the BCUC resolves this matter soon, so British Columbians get clear information on what’s driving prices at the pumps.”
In the battle between profit-hungry gas companies and vote-hungry governments there will always be one clear loser: The driving public.