February 24, 2015 5:59 pm
Updated: February 26, 2015 9:48 am

Gas prices are rising across Canada — and will likely jump further

Gas prices are once again on the rise, as unseasonably cold weather cuts into refinery production. Other factors, like taxes and fatter supplier profit margins are amplifying the rise felt by motorists.

Global News

Canadian motorists across most of the country have dealt with frigid driving conditions for the past several weeks, and are now confronting another biting reality as a result: higher gas prices.

A brutally cold February has meaningfully dented gas production at U.S. refineries that make gasoline destined for Canada or influence the price for gas that is, experts said Tuesday.

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Even as oil prices remain low at below $50 barrel (U.S.), wholesale North American petroleum prices have risen sharply since late January, filtering through to retail pump prices. Average Canadian retail gasoline prices bottomed out at 91.3 cents a litre on Jan. 20, according to Natural Resources Canada. Since then, they’ve climbed about 13 per cent (see chart below).

The cold weather has resulted in temporary shutdowns for a number of facilities in the U.S. northeast, according to Dan McTeague, an expert on Canadian and U.S. gas prices. “There’s no scarcity of oil at the moment but there is for gasoline in certain markets,” McTeague, who helps operate price-tracking site gasbuddy.com, said by phone.

“This cold weather has stopped a lot refineries in their tracks. A refinery needs oil,” McTeague said, referencing a facility near Philadelphia that processes 300,000 barrels of oil into gas each day but is temporarily offline.

He said unseasonably cold temperatures have created logjams along the river leading to the facility. “A barge can’t get through a frozen river.”

McTeague said some refineries at this time of year also begin maintenance duties undertaken before they switch over to summertime petroleum, which includes changing up processes to include additives that mitigate emissions.

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Prices ‘magnified’

Prices in Canada are being exacerbated by three factors above and beyond supply constraints, McTeague said.

The first is the Canadian dollar, which has weakened a further 5.5 per cent since mid-January against the U.S. greenback, lifting imported fuel costs in recent weeks.

Government taxes also amplify the jump in prices for end-users, since HST and other taxes collected in each province are a fixed percentage of the pre-tax price.

Charging 13 per cent tax on a $0.80/litre wholesale price compared to $0.90 cents for example amounts to a 1.5 cent/litre difference in the final cost. “As gas prices go up, [taxes] tend to magnify the [cost] to consumers,” McTeague said.

Gas distributors have also started to inflate profit margins again. “Gas was selling without any retail margin, often even below cost” last month, McTeague said. “There was a gas war that took place that brought prices down.”

With tightening supplies now, Canadian gasoline suppliers are once again raising prices, he said.

Looking at the futures market for North America wholesale gasoline, motorists who thought sub-$1 gas was here for awhile will be disappointed. Prices appear poised to rise a further six to seven cent per litre beginning next week as the unseasonably cold temperatures stick around into March.


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