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B.C. gasoline prices rose with land costs but full differentials unexplained: report

Filling Gas Tank_Sm_070218Gasoline prices in British Columbia have risen in line with land costs and credit card processing fees but that doesn’t fully explain why they’re so much higher than in other parts of Western Canada, a new report says.

The report by Deetkten Group was posted online last week by the B.C. Utilities Commission, which is overseeing a public inquiry into sky-high gas prices in the province.

The consultant’s report says Vancouver’s gasoline retail margins, which are the difference between the wholesale price for fuel and the retail price less tax, “highly” correlates with local land values.

It also says credit card processing fees are applied as a percentage of a total transaction, meaning the fees will be higher in jurisdictions like Vancouver where prices at the pump are already high.

“Rising land costs and credit card processing fees may account for nearly the entire differential observed between Vancouver and comparable areas, at least up to the end of 2018,” the report says.

But even after those factors are taken into account for this year, 1.4 cents per litre in the retail margins remains unexplained.

The report also can’t fully explain why wholesale gas prices are much higher in B.C. cities compared with other jurisdictions.

The consultants compared wholesale prices in Vancouver and Kamloops with Edmonton and Seattle, which are also sources of supply for B.C.

Transportation and regulatory costs may account for higher wholesale gas prices in B.C., but even estimating those costs at their highest potential doesn’t explain the difference, it says.

“Even the highest estimates of transport and regulatory costs combined do not sufficiently account for the differential in wholesale prices between the Vancouver market and the Edmonton and Seattle markets, particularly in 2019,” the report says.

A differential of about five cents per litre between Vancouver and Edmonton this year is unaccounted for in the report.

Unlike gasoline prices, diesel prices have remained largely consistent with historical trends when compared with other parts of Western Canada.

“This may be in part due to different demand dynamics in the diesel market,” it says.

Premier John Horgan ordered the inquiry in mid-May as the price of a litre of regular gasoline climbed above $1.70.

In commissioning the probe, he said that gas and diesel price increases were “alarming, increasingly out of line with the rest of Canada, and people in B.C. deserve answers.”

Four days of oral submissions are in the process this week and the three-member panel can question industry representatives, including gas and diesel suppliers.


Most fuel suppliers won’t release profit margin details to B.C. gas price probe

Most gas suppliers in British Columbia are refusing to share how they set prices at the pump just days before hearings on the issue are set to begin at a public inquiry.

The B.C. Utilities Commission has been ordered to review the last four years of gas and diesel pricing in the province and asked suppliers to complete a questionnaire about various business aspects including their profit margins.

Commission CEO David Morton said the inquiry panel is working to determine if it needs the financial information and to assure the companies that it won’t release confidential information.

“I don’t think there’s any cause for alarm,” Morton said in an interview last week.

The suppliers range from Shell and Imperial to Suncor, Husky, Super Save and 7-11, but documents submitted to the commission show that only 7-11 has responded with details about how it sets the price per litre at the pumps.

It has requested the information not be released publicly and the utilities commission has complied, posting a redacted version of 7-11’s questionnaire response on its website.

The other suppliers offered almost identical reasons for withholding profit margin data, with Husky’s submission citing “commercially sensitive information” that is “not shared publicly or between refiners.”

As the price of a litre of regular gasoline climbed above $1.70 in mid-May, Premier John Horgan ordered the probe, saying that gas and diesel price increases were “alarming, increasingly out of line with the rest of Canada, and people in B.C. deserve answers.”

The inquiry timetable calls for the release of the second phase of the utilities commission consultant report today, followed by up to four days of oral submissions, where panel members can question industry representatives, including gas and diesel suppliers.

Bruce Ralston, minister of jobs, trade and technology, said in a statement that he’s disappointed with the companies that refused to provide the information and urged them to co-operate.

“People deserve to know why the price of gasoline in B.C. has seen such wild swings,” Ralston said.

But Morton said he’s not surprised that most of the companies withheld the information.

The utilities commission has established procedures for dealing with confidential information, including commercial information around prices that would harm the company if released, but it typically works with gas and electric utilities.

“Many of the participants aren’t as familiar with our approach to confidentiality so we understand there may be some apprehension around it,” Morton said.

If the organizations can show they would experience harm because a competitive price became public, then the utilities commission would typically honour that, he said.

“If there’s information critical to the inquiry of that nature, then the panel would review that information and we would make a decision but we wouldn’t make a reference to any of those numbers in the decision.”

The commission generally tries to avoid confidential information in its proceedings because it means decisions may have to be redacted, which it doesn’t consider to be “the best outcome,” Morton said.

Morton, who is on the inquiry panel, said they are in the process of reviewing the submissions and may determine that they don’t actually need specific numbers to answer the inquiry’s questions of why B.C.’s gas prices are different from the rest of the country and why the prices swing.

If the panel determines the figures are vital to the inquiry, and the companies still refuse to share them, the commission can apply through the B.C.Supreme Court for access.

That would set back the inquiry’s timeline but it remains on schedule so far, Morton said.

When the commission unveiled the process for the inquiry in May, the utilities commission said it would explore factors potentially affecting prices in B.C. since 2015, including competition and the amount of fuel in storage.

It is also expected to examine mechanisms that could be used to moderate price fluctuations and increases.

The three-person inquiry panel must submit its final report by Aug. 30.


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Oil companies may be called to testify under B.C.’s gas price probe

British Columbia’s independent energy regulator will have the power to call oil company representatives as witnesses into an investigation of high gasoline prices in the province.

Premier John Horgan has tasked the B.C. Utilities Commission to examine the market factors that affect wholesale and retail gas prices, and he wants a report by Aug. 30.

Gas prices hovering around $1.70 per litre in the Metro Vancouver area have been the highest in Canada for several months.

Horgan says he’s given the utilities commission broad terms of reference to conduct a fair and transparent investigation that would include concerns about competition and why recent gas refining margins for Vancouver have been more than double the Canadian average.

Liberal Leader Andrew Wilkinson has been calling on the New Democrats to reduce provincial gas taxes and has applied to participate in the investigation as an intervener.

Horgan says in a statement the terms of reference give the utilities commission the reach to investigate price fixing and gouging and to make recommendations.


Vancouver expected to headline long Canadian summer of high gasoline prices

Gasoline prices are expected to remain just below record highs all across Canada this summer except in Vancouver, where a perfect storm of factors will likely ensure motorists continue to set new all-time records at the pumps.

Fuel market analysts say average retail prices in Canada are within a penny or two of their year-ago levels, which were some of the highest on record for many markets.

“Vancouver certainly is (at historic highs) but the other major markets we’re looking at, such as Calgary, Toronto, Halifax, Montreal, they’re not exceeding historical levels, they’re basically at historic levels,” said Michael Ervin, senior vice-president at the Kent Group Ltd.

The average price of gasoline in major Canadian markets last week was about $1.34 per litre, but it varied from around $1.23 in Calgary and Winnipeg to the high of $1.70 or more in Vancouver.

Gasoline prices rise every spring due to factors including the higher cost of making summer gasoline — which requires an extra four or five cents per litre for additives to prevent evaporation — and supply interruptions as refineries shut down for routine maintenance, the analysts said.

Prices have also risen in part due to the federal carbon tax on fuel that was applied to Saskatchewan, Ontario, New Brunswick and Manitoba on April 1.


Ontario Chamber of Commerce asks government to abandon gas pump sticker plan

Forcing gas station operators to display Ontario government stickers on the federal carbon tax violates their rights and freedoms, the province’s chamber of commerce said April 25, as it asked the Progressive Conservatives to reverse their decision.

OCC president Rocco Rossi

OCC president Rocco Rossi

In a letter to the Energy Minister Greg Rickford, chamber president Rocco Rossi said the group’s members are concerned about the “political nature” of the decals, which were unveiled earlier this month as part of the Tory government’s fight against the federal levy.

“Our members—including gas station operators—have expressed concerns regarding the political nature of the stickers, viewing them as a violation of their rights and freedoms,” Rossi said.

Ontario has introduced legislation that requires stickers—in English and French—to be put on gas pumps showing that the tax has added 4.4 cents a litre to the price of gasoline and that will rise to 11 cents per litre by 2022.

The government said earlier this month the stickers will cost taxpayers approximately $5,000 to print 25,000 decals but that does not cover the cost to distribute them to the province’s 3,200 gas stations.

Gas station operators who don’t display the government-mandated stickers could be subject to fines of up to $10,000 per day.

Rossi called on the government to scrap the section in the legislation, which mandates the stickers.

“This initiative is an example of unnecessary red tape: it is both a new administrative burden and an increased cost to business thanks to the punitive and outsized fines for non-compliance,” he said in the letter.

Rickford defended the stickers, saying in a statement that the federal carbon tax will have a negative impact on every one in the province.

“Ontario families have the right to know exactly what the Trudeau carbon tax costs them every time they fill up at the pump,” he said in a statement. “The carbon tax will kill jobs and raise the price of nearly everything across our province, hurting every member of the Ontario Chamber of Commerce.”

The letter is a rare example of the chamber publicly disagreeing with the Ford government on policy since it came to office last year. Rossi points out that the chamber has supported the Tories on a number of pieces of legislation and the government’s ongoing work to reduce Ontario’s deficit and debt.

The carbon tax is expected cost to a typical household $258 this year and $648 by 2022. Residents of provinces with the tax will be getting rebates on their income tax returns that start at $128 annually and increase for people with spouses or dependents at home. The federal government says a family of four in Ontario would get $307 this year.

Ontario is one of four provinces, including Manitoba, Saskatchewan and New Brunswick, where Ottawa imposed the levy because they opted not to impose their own pricing schemes on carbon emissions.


Canada banning oil, gas and mining from marine protected areas

The oil and gas industry has worn out its welcome in Canadian marine conservation areas. Fisheries Minister Jonathan Wilkinson announced a total ban on oil and gas work, as well as mining, waste-dumping and bottom-trawling, in all of Canada’s marine protected areas. Wilkinson was at an international nature summit in Montreal where Canada is pushing other countries to do more to protect the global environment.

The changes apply recommendations made last fall by a panel the government asked to provide advice on the best way to improve standards in marine protected areas. The ban on industrial activities brings Canada up to international standards recommended by the International Union for Conservation of Nature.

The bans apply only to marine protected areas, which are specific areas within bodies of water that are granted protected status by federal, provincial or territorial governments. Until now, activities like oil and gas exploration and exploitation were only banned in these areas on a case-by-case basis.

Marine refuges, which are more numerous areas where governments impose fisheries closures often to protect just a single species, will still allow oil and gas operations.

The ones that do will not be counted towards Canada’s commitment to protect 10 per cent of the country’s marine and coastal areas by 2020.

Canada had hit nearly eight per cent by the end of 2018, but more than half of that amount is marine refuges. It’s not clear yet what effect discounting refuges that are still open to oil and gas work will have on the total.

The World Wildlife Federation of Canada said last fall it was concerned about the exemption for marine refuges.

Oceana Canada, a charity devoted to protecting ocean life, also raised concerns that four months after Canada named the Northeast Newfoundland Slope Conservation Area — a 47,000-square-kilometre section of the Atlantic Ocean — as a marine refuge in 2017, it agreed to allow oil and gas exploration in the same area. That decision also angered local fishers since the designation barred all fishing in the name of environmental protection.