CORRECTION: An earlier version of this article stated that adding more ethanol to gasoline contributes about five or six cents a litre to the price of gas. It has been changed to buying carbon offsets.
Relief at the pumps thanks to the end of consumer carbon pricing appears to have been short-lived, with gas prices this week only about five cents lower than a year ago.
That’s despite the carbon pricing system last year adding 17.6 cents per litre to the cost for drivers in Ontario, according to the Canadian Taxpayers Federation.
However, an industry analyst says a seven or eight cent per litre drop is expected Sept. 15 with the official end of summer blended gasoline, which is more expensive to make.
In the meantime, Canadians for Affordable Energy president Dan McTeague offered some reasons as to why gas prices are so high — sitting at 144.9 cents a litre in much of the GTA and Ottawa; 143.9 in Barrie; 138.9 in Hamilton, Sarnia and London; 137.9 in Waterloo, 136.9 in Windsor and 131.9 in Kingston, according to Gas Wizard.
McTeague says clean fuel regulations have resulted in an increase in ethanol in gasoline, typically derived in Canada from corn or wheat. While ethanol has a lower carbon footprint than gasoline, McTeague says it “doesn’t burn quite the same way,” and so someone driving a vehicle that used to go 100 kilometres on eight litres would now require 8.2 or 8.3 litres.
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Adding more ethanol helps towards reducing emissions, but is not enough to meet those requirements, so refineries are also turning to carbon offsets.
Buying carbon offsets contributes about five or six cents a litre to the price of gas, McTeague says, though he argues that number will climb to as high as 20 cents a litre by 2030.
Next, McTeague pointed to the Canadian dollar against the U.S. greenback. He said that a weaker Canadian dollar compared to this time a year ago accounts for about two cents per litre.
Then, there’s the price of gasoline itself, which is up almost 30 cents a gallon year over year on the U.S. market, which sets the benchmark. That works out to about 11 cents per litre, plus HST.
Combine five cents in carbon offsets, two cents in a weaker Canadian dollar and 11 cents in the wholesale price of gasoline, and that works out to gas costing at least 18 cents a litre more than a year ago, erasing the 17.6 cents per litre savings Canadians saw in April when consumer carbon pricing was lifted.
Gas stations also add about seven to nine cents per litre on top of the wholesale price and tax in order to cover the cost of running the gas stations themselves.
“A lot of gas stations in the past while have been shaving those retail margins off, especially in the evening … gas stations will often offer gasoline for the price it costs them to restock it or repurchase it or replace it,” McTeague said.
McTeague suggests drivers across Canada, mostly in larger cities, “never ever ever buy your gasoline before 6 p.m. Never. Because you’re just giving eight, nine cents away to the gas station.”
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