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Market Snapshot: Gasoline pricing and the role of Trans Mountain pipeline in British Columbia's gasoline supply

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Release date: 2019-05-15

Gasoline pricing

Gasoline’s retail price at the pump consists of the following major components. Changes in any of those components can affect gasoline prices in different regionsFootnote 1:

Crude Oil Price: The input cost of crude oil. Crude oil prices account for some of the price changes seen by consumers at the pump. According to Natural Resources Canada, in April 2019, the crude oil portion of regular gasoline in Vancouver averaged 51.0 c/litre, approximately 10% below the Canadian average crude oil price.

The input cost of crude oil. Crude oil prices account for some of the price changes seen by consumers at the pump. According to Natural Resources Canada, in April 2019, the crude oil portion of regular gasoline in Vancouver averaged 51.0 c/litre, approximately 10% below the Canadian average crude oil price. Refining Margin: The cost of processing the crude oil into gasoline. This can be calculated as the difference between the price of crude oil, and the wholesale price at which the refiner sells transportation fuels. This also includes the cost to transport crude oil to refineries. In April 2019, the refining margin portion of regular gasoline in Vancouver averaged 52.1 c/litre, roughly double the Canadian average refining margin.

The cost of processing the crude oil into gasoline. This can be calculated as the difference between the price of crude oil, and the wholesale price at which the refiner sells transportation fuels. This also includes the cost to transport crude oil to refineries. In April 2019, the refining margin portion of regular gasoline in Vancouver averaged 52.1 c/litre, roughly double the Canadian average refining margin. Marketing Margin: The costs associated with selling the gasoline to consumers at the local station. This can be calculated as the difference between the wholesale price, and the retail price of gasoline, without taxes. This also includes the cost to transport gasoline from refineries to gas stations. In April 2019, the marketing margin portion of regular gasoline in Vancouver averaged 10.5 c/litre, approximately 69% higher than the Canadian average marketing margin.

The costs associated with selling the gasoline to consumers at the local station. This can be calculated as the difference between the wholesale price, and the retail price of gasoline, without taxes. This also includes the cost to transport gasoline from refineries to gas stations. In April 2019, the marketing margin portion of regular gasoline in Vancouver averaged 10.5 c/litre, approximately 69% higher than the Canadian average marketing margin. Taxes: The taxes paid to provincial, federal, and sometimes municipal governments. These can be flat charges per litre, or percentages of price. In April 2019, the total tax portion of regular gasoline in Vancouver averaged 53.9 c/litre, approximately 21% higher than the Canadian average tax.

Figure 1: Daily Canadian Regular Gasoline Prices

Source and Description Source: Kent Group Ltd. Description: This graph shows daily or monthly gasoline prices from June 2016 to May 2018. The data can be shown by product: regular gasoline, midgrade gasoline, premium gasoline, or diesel; and by type of price, retail, retail excluding tax, or wholesale. It also shows the prices in select regions, including Toronto, Edmonton, Halifax, Montreal, Vancouver, and the Canadian average price.

The role of Trans Mountain pipeline in British Columbia’s gasoline supply

British Columbia consumed 96 thousand barrels a day of gasoline in 2018. This gasoline came from a variety of sources, including refineries in the province, transfers from Alberta, and imports via barge from the United States.

The Trans Mountain pipeline plays two roles when it comes to supplying the British Columbia gasoline market. First, the pipeline directly supplies the British Columbia market with around 28 thousand barrels a dayFootnote 2 of shipments of refined petroleum productsFootnote 3. Second, the Trans Mountain pipeline supplies the Parkland Refinery in Burnaby, the largest refinery in British Columbia, with around 50 thousand barrels per day of crude oilFootnote 4 which it uses to produce gasoline and other refined products. Overall, the Trans Mountain pipeline plays an important role in supplying the British Columbia gasoline market.

The existing Trans Mountain pipeline carries heavy and light crude oil as well as refined petroleum products in a single line from Edmonton to the Burnaby area, shipping roughly 70% light crude oil, 20% heavy crude oil, and 10% refined petroleum products. The pipeline has been operating at or near capacity since 2006.

Figure 2: Trans Mountain Pipeline throughput and capacity (Monthly) Footnote 5

Source and Description Source: NEB Pipeline Profiles – Trans Mountain Description: This graph shows monthly throughputs and capacity on the Trans Mountain pipeline of domestic heavy and light crude oil and refined petroleum products between January 2006 and March 2019.

Trans Mountain currently provides transportation service to a number of different shippers. The rules of this transportation service are governed by a tariff that is regulated by the NEB. Trans Mountain’s tariff [Document 3612563]sets out the details of what can be shipped on the pipeline, as well as the rules by which shippers can nominate volumes to ship on the pipeline, and how the pipeline allocates available pipeline capacity to shippers.

The tariff cannot allow for unjust discrimination in favour of (or against) any one shipper or group of shippers. Specifically, the NEB Act requires that there be no unjust discrimination against any person or locality in tolls, service, or facilities. In practice, for the Trans Mountain pipeline, this means no priority is given to shipments of heavy crude oil, light crude oil, or refined petroleum products.

Ultimately, shippers decide what they ship, and these decisions are based on contractual and tariff terms, available capacity and market forces.