Gasoline prices in Canada are disconnected from the costs of production. They are not driven by cost plus a reasonable return for capital invested. They are driven by what consumers are willing to pay. Canadians are deliberately being conditioned into accepting a new level of unfair margins—margins that not only harm individuals and non-oil businesses, but the health of the Canadian macro-economy.
When crude prices hovered around $100 a barrel we accepted pump prices of around $1.30 a litre. Refiners are relying on that price point to ratchet up their price-gouging behaviour. Any price lower than last year’s high feels like an improvement.
A huge disconnect exists between the price of crude oil and gasoline even though crude is the major component in a refiner’s cost. Big Oil is taking advantage of Canadians at the pumps.
When the election was called, Natural Resources Canada (NRCan) stopped producing the Fuel Focus Report—its bi-weekly window on economic drivers influencing gasoline prices “intended to provide Canadians with regular information on the various aspects of the gasoline market in Canada.”
Obvious price gouging began to emerge in early March. The price of crude fell, but prices at the pump increased. Before Fuel Focus Report data was suspended in July, it showed Canadian refining and marketing margins hitting an all time high of 38.6 cents a litre (see figure 3 in this report).
In Vancouver, it was 48.1 cents and in Toronto, 43.1. With further research, I determined that during August the upward trend continued, abating slightly in September— but you can’t see that in Fuel Focus.
Between 2000 to 2014, refining and marketing margins averaged 17.7 cents a litre. For the first eight months of 2015, refining and marketing margins averaged 27.3 cents a litre. Canadians have forked over 10 cents a litre more for gasoline during the first two-thirds of this year than we paid on average over the previous fifteen. That’s a dime a litre going straight to the bottom line.
Canada’s largest oil producer and integrated refinery operator, Suncor, extracts about 550,000 barrels of crude per day and owns three Canadian refineries that supply more than 17 percent of the Canadian gasoline market.
RBC's financial VP and chief economist, Craig Wright, explained to the Committee that although gas prices tend to go down more slowly than they go up, based on prices moving into 2015, he calculated the offset from gas savings alone would work out “to about $11 billion equivalent tax cut for the Canadian consumers. That’s going to help.”
But lower prices have not materialized to the degree expected. Ten cents a litre in excessive margins at the pumps is a lot of money. So far, in September, average margins are over 30 cents a litre. If this continues, excess gasoline pricing will mean a loss of $5 billion in benefits to Canadian consumers and non-oil businesses by year end.
When the disconnect materialized last spring, instead of taking action, the Harper government produced an industry-enabling rationale. Natural Resources Canada shored up refiners’ excessive pricing practices by suggesting Canadian-made petroleum products are sold in US dollars, but Canadians purchase gasoline with Canadian dollars.
more
Canadians get ripped off at the pumps | National Observer&
When crude prices hovered around $100 a barrel we accepted pump prices of around $1.30 a litre. Refiners are relying on that price point to ratchet up their price-gouging behaviour. Any price lower than last year’s high feels like an improvement.
A huge disconnect exists between the price of crude oil and gasoline even though crude is the major component in a refiner’s cost. Big Oil is taking advantage of Canadians at the pumps.
When the election was called, Natural Resources Canada (NRCan) stopped producing the Fuel Focus Report—its bi-weekly window on economic drivers influencing gasoline prices “intended to provide Canadians with regular information on the various aspects of the gasoline market in Canada.”
Obvious price gouging began to emerge in early March. The price of crude fell, but prices at the pump increased. Before Fuel Focus Report data was suspended in July, it showed Canadian refining and marketing margins hitting an all time high of 38.6 cents a litre (see figure 3 in this report).
In Vancouver, it was 48.1 cents and in Toronto, 43.1. With further research, I determined that during August the upward trend continued, abating slightly in September— but you can’t see that in Fuel Focus.
Between 2000 to 2014, refining and marketing margins averaged 17.7 cents a litre. For the first eight months of 2015, refining and marketing margins averaged 27.3 cents a litre. Canadians have forked over 10 cents a litre more for gasoline during the first two-thirds of this year than we paid on average over the previous fifteen. That’s a dime a litre going straight to the bottom line.
Canada’s largest oil producer and integrated refinery operator, Suncor, extracts about 550,000 barrels of crude per day and owns three Canadian refineries that supply more than 17 percent of the Canadian gasoline market.
RBC's financial VP and chief economist, Craig Wright, explained to the Committee that although gas prices tend to go down more slowly than they go up, based on prices moving into 2015, he calculated the offset from gas savings alone would work out “to about $11 billion equivalent tax cut for the Canadian consumers. That’s going to help.”
But lower prices have not materialized to the degree expected. Ten cents a litre in excessive margins at the pumps is a lot of money. So far, in September, average margins are over 30 cents a litre. If this continues, excess gasoline pricing will mean a loss of $5 billion in benefits to Canadian consumers and non-oil businesses by year end.
When the disconnect materialized last spring, instead of taking action, the Harper government produced an industry-enabling rationale. Natural Resources Canada shored up refiners’ excessive pricing practices by suggesting Canadian-made petroleum products are sold in US dollars, but Canadians purchase gasoline with Canadian dollars.
more
Canadians get ripped off at the pumps | National Observer&
