Photo: Contributed - http://media.gasbuddy.com/

Okanagan residents often complain about the "sunshine tax" when it comes to the cost of living in our area, especially when it comes to the price of gasoline.

But an industry watchdog has another explanation – despite the fact retailers in the Okanagan have higher profit margins than elsewhere.

“There are many tourist destinations across the country, not perhaps as beautiful as the Okanagan, but I would say it is fundamentals that are keeping these prices up and the shortage in Edmonton, the shortage of supply,” says Dan McTeague, senior petroleum analyst at GasBuddy.com.

This supply shortage has left the Interior feeling the pinch, while McTeague is predicting a price drop on the B.C. coast.

“You have higher wholesale prices for gasoline in your market, mostly because of the shortages, which oil companies aren't required to disclose,” explains McTeague.

“There have been three incidents in the past three weeks, all of which had an affect on the three refineries in Edmonton, one or another, which has helped keep upward pressure on prices, whereas Vancouver is not exposed to that market.”

Vancouver, on the other hand, gets its gas from other refineries at the coast.

“This is a problem we face, from the B.C. Interior all the way out to Thunder Bay in the east. What happens with refineries in Edmonton and the smaller one in Saskatchewan does affect prices one way or another,” says McTeague.

“If you have higher demand in the States and Canada, and lower supply, prices have to go up. Which is currently being made worse by a combination of a weaker Canadian dollar, because all fuel is priced in U.S. terms, and of course higher taxes.”

He says if you were to break down the price of a barrel of oil, usually the benchmark is at $50/barrel, which works out to about 40 cents/litre – much lower than the wholesale prices currently being felt in Kelowna, Kamloops and Edmonton, which sits at the 75-78 cents/litre range.

“It explains why prices are as high as they are. If you want it, you have to pay for it – and that is why consumers are paying as much as they are on gasoline,” says McTeague.

“Over the last 10 to 15 years now, we have seen retail margins whittled down. They don't go up because it is summer and a lot of tourists show up. Kelowna has always been high and Kamloops has always been more competitive, but both right now are suffering from high wholesale prices as a result of the shortage in refinery capacity provided by Edmonton and aggravated by the weakness in Canadian dollar – which, denies us being able to take advantage of our local crude prices.”

He says while Kamloops has traditionally seen one of the lowest retail margins in the country, Kelowna was also known for having one of the highest – but all that has changed.

“Retail margins traditionally in a market like Kamloops were two or three cents a litre, which is hardly enough to turn your pumps on, taking into consideration a gas station has to take on honouring credit cards, which costs them two cents a litre,” explains McTeague.

“Whereas, Kelowna has always had very generous margins, above the average at 10-13 cents a litre owing to a lack of competition among retailers, and generally speaking, lack of incentive to bring those prices down.”

But, high wholesale prices are changing the game, and now Kamloops stations have moved to a seven cents a litre retail margin, while Kelowna remains at 12 cents a litre.

Comparatively, major markets across the country maintain a retail margin of nine cents a litre, including Vancouver and Toronto.

“The aggravating issue here is not anything less than the significance of having a refinery shortage or supply shortage as a result of the refinery disruptions in Edmonton,” says McTeague.

“The curious thing is that no one is talking about it, none of the so-called experts are mentioning this, but it is perhaps the most important factor in sustaining prices as high as they are considering where oil is at,” says McTeague.

“The irony for me, as a former member of Parliament, is that I predicted this would happen. Canada continues to shut down refineries and allow mergers and acquisitions in the downstream of the oil industry, which would eventually wind up, given the shortage of supply and given we are net importers of gasoline, paying a premium for,” adds McTeague.

“Entirely predictable, but unfortunately that fell on deaf ears.”

Thursday afternoon, gas prices are hovering around 131.9 in Kelowna, 127.9 in Penticton, 120.9 in Vernon and 125.9 in Kamloops, compared with an average of 134.9 in Vancouver and a national average of 115.7.