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Shock at the pumps largely a refining issue

Gasoline prices in Vancouver spiked twice over the weekend by 38 cents
No laughing matter -- refinery outages have pushed gasoline prices to new highs in Metro Vancouver.

Metro Vancouver drivers were greeted this weekend with some eye-watering gasoline prices, thanks to refining issues.

Despite the fact global oil prices have been falling since July, gasoline prices in Metro Vancouver shot up from about $1.95 last week to $2.20 per litre Saturday. They then shot up another 13 cents per litre to a record $2.33 per litre Sunday at some gas stations, though by the end of the day, some of those retail gas stations had lowered their prices to around $2.18 per litre.

There is still a wide range in prices today, with regular gasoline prices in Metro Vancouver ranging from $2.10 to $2.33 per litre. Dan McTeague of GasWizard expects $2.33 per litre will be a more typical price over the next few days.

Meanwhile, gasoline prices have declined in Eastern Canada by about five cents per litre in cities like Toronto and Montreal.

Gasoline prices also shot up over the weekend in Alberta and Saskatchewan, as well as in Pacific Northwest states like Washington and California, which suggests the price spikes are a regional issue related to refining capacity. On Sunday, prices were up about 13 cents per litre in Calgary and Edmonton.

McTeague said spot prices for gasoline for the American Pacific Northwest is US$4.24 per gallon.

"I've never seen $4.24 for Pacific Northwest numbers," he said, adding spot prices for California are US$4.61 per gallon.

At the beginning of September those spot prices for the Pacific Northwest in the U.S. were just US$2.92 per gallon, he said.

The Sturgeon refinery in Edmonton is down for maintenance. The shutdown started in early August and was expected to last for two months. The refinery makes diesel, as well as naptha, a component of high octane gasoline.  Despite the shutdown of the Sturgeon refinery, diesel prices are actually down by about five cents per litre across the country.

But there have also been refinery turnarounds and unexpected shutdowns in the U.S., including a major fire at a refinery in Ohio, a maintenance shutdown at a refinery in Ferndale, Washington, and a batched pipeline -- the Olympic pipeline -- serving refineries in the Pacific Northwest is down for maintenance, McTeague said.

"One of the longest gas price declines on record has finally come to an end after over a dozen weeks, with gas prices shooting up in several regions amidst myriad refinery issues from the West Coast to the Great Lakes and in between," Patrick De Haan, head petroleum analyst at GasBuddy, said in a press release.

"I don't know that I've ever seen a wider gamut of price behaviors coast to coast in my career. A slew of unexpected refinery disruptions, including fires and routine maintenance, have seemingly all happened in a short span of time, causing wholesale gas prices to spike in areas of the West Coast, Great Lakes and Prairies - and some of those areas could see prices spike another 10-20 cents per litre or more until issues are worked out.

“In addition, as Tropical Storm Ian nears the U.S. coast, some refiners could see limited disruption. There remain many factors driving prices both up and down across the country."

Global oil prices spiked above US$120 per barrel between March and June this year, driving North American gasoline prices to some record highs.

Starting in mid-July, they began falling, partly in response to the release of strategic oil reserves in the U.S., with the North American benchmark, West Texas Intermediate (WTI) now sitting at US$77 per barrel – the lowest price since the beginning of January 2022.

But crude oil prices are only one of several factors that contribute to the retail price of gasoline.

In 2022, in Vancouver, crude oil prices contributed about 33% of the cost of gasoline, according to the BC Utilities Commission (BCUC). Refining margins made up 29% and taxes 29% as well. Retail margins made up only 4% of the cost of a litre of gasoline in Vancouver.

In Abbotsford, which is outside the Metro Vancouver transit levy region, taxes made up 23% of the cost of gasoline, retail margins 6%, refining margins 30% and crude oil 40%.

In Edmonton, regular gasoline prices shot up by about 12 cents per litre Sunday. According to GasBuddy, Edmonton prices for regular gasoline range from $1.27 to $1.45 per litre.

McTeague said gas prices in Metro Vancouver could go up another two cents Wednesday, but that British Columbians can then expect to see gas prices start to drop by the end of this week as refineries and pipelines come back online.

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