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B.C. gas prices expected to reach near record high this weekend

Gas prices near record high?

Gasoline prices in B.C. are once again on track to break summertime record highs, and about 60,000 drivers in B.C. couldn’t care less.

That’s how many British Columbians now drive electric vehicles, according to one recent estimate.

Vancouver drivers can expect to pay $1.70 per litre for gasoline, starting Friday, predicts Dan McTeague, president of Canadians for Affordable Energy. The last record set in Vancouver was in the summer of 2019, when gasoline prices hit $1.72 per litre. Vancouver gas stations are already in the $1.66 range.

Drivers in the B.C. Interior have the luxury of avoiding some of the taxes Lower Mainland drivers deal with, but the price at the pump is going up here too.

A litre of gasoline is currently selling for $1.43 in Kelowna, $1.45 in Penticton and $1.42 in Vernon. In Kamloops, with the exception of Costco selling at $1.35, most stations are selling at $1.43.

The same market forces are in play in both the BC Interior and Lower Mainland, meaning a litre of gas in Kelowna could be selling for close to $1.50 soon.

And that could be the new normal, he said, thanks in part to the fact the U.S. is no longer oil independent, and is once again having to import oil, which could mean sustained high oil prices.

Last summer, no one complained about high gas prices because oil prices had crashed, and demand was so low -- because so few people were driving -- that gas prices in Vancouver actually went below $1 per litre.

But now that the pandemic is lifting, summer travel is getting underway.

Partly what is driving spiking gas prices in North America is a convergence of economies reopening, which means more people driving, and lower oil production.. Also, a Phillips 66 refinery in Washington state has one unit down, which is contributing to recent spikes in prices in the Pacific Northwest, McTeague said.

A global pandemic resulted in a sudden plunge in demand for oil in 2020, leading oil producers in North America to cut production. The demand for oil is now outstripping the current production levels, and will for some time, McTeague believes.

American shale producers cut production so dramatically that, in May this year, the U.S. imported 22 million barrels of oil from Russia, McTeague said. Currently, the benchmark West Texas Intermediate (WTI) price for oil is US$73 per barrel – roughly double what it was one year ago.

The U.S. Energy Information Administration (EIA), estimates American imports of oil will increase 62% bhy 2022, due to lost production in the U.S.

Higher gasoline prices are happening throughout North America, but as usual, they are highest in Vancouver.

Convinced that suppliers are deliberately gouging Vancouver with high wholesale prices, the NDP government commissioned the BC Utilities Commission (BCUC) to investigate.

The BCUC inquiry was somewhat inconclusive in explaining a $0.13 per litre price difference in wholesale prices in B.C. compared to other parts of Canada. It said the difference was unexplained, but speculated that it was the result of an uncompetitive market.

The BCUC had been instructed not to examine any provincial policies, like tax rates or its low carbon fuel standard, that might contribute to B.C.’s disproportionately higher gasoline prices.

The Canadian Taxpayers Federation has taken on the task of looking at the role that taxes and other policies, like low carbon fuel standards, plays in gasoline prices in Canada.

It calculates that Metro Vancouver drivers pay $0.68 per litre in various fuel taxes, including a transit levy, with the rest of British Columbians paying $0.54 per litre, and Victorians paying $0.61 per litre.

“If drivers are fuming at the cost of gasoline, they should know that about 68 cents of that pump price is taxes in Metro Vancouver,” Kris Sims, B.C. director of the Canadian Taxpayers Federation, said in a press release.

“Premier John Horgan, Prime Minister Justin Trudeau and federal Conservative Leader Erin O’Toole all want high taxes on fuel, and it’s just going to get worse if we don’t tell them to stop.”

The federation includes O’Toole in its criticism because the federal Conservative leader has recently said a Conservative government would implement its own version of carbon pricing.

And it is carbon taxes that the federation has singled out most of all in its criticism of the high taxes Canadians pay for gasoline.

The federation says B.C.’s carbon tax adds $0.10 per litre to gasoline, and estimates that the province’s low carbon fuel standard – which requires fuel suppliers to add certain percentages of renewable fuels to gasoline – adds about $0.14 per litre to the price at the pumps in B.C.

“Combined, B.C.’s two carbon taxes cost about 24 cents per litre of gasoline,” the federation estimates.

It is worth noting that Europeans pay much higher prices and taxes for gasoline and diesel than Canadians do, although most European nations aren’t major oil producers, whereas Canada is the world’s fifth largest oil producer.

Once a new federal clean fuel standard goes into effect, and federal carbon pricing begins to match B.C.’s, McTeague expects gasoline prices in other parts of Canada may start to catch up to B.C’s prices.

But taxes and fuel standards aren’t the only thing driving high oil and gasoline prices. McTeague believes a new era of sustained high oil prices has begun and will not end anytime soon.

That’s because so much production of oil by American shale oil producers has been lost. And it may never be made up.

The pandemic may have caused American shale producers to cut production and scale back investment in new wells, but the fossil fuel divestment movement is now succeeding in making it harder for oil producers to raise capital to finance new production, McTeague said.

That’s good news for Russia, Saudi Arabia and other major oil producing nations, but not so good for North Americans, whose only choice for escaping sustained high gasoline prices will be to switch to electric vehicles.

with files from Colin Dacre



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