Gas prices across Metro Vancouver this week were $1.50 a litre. That’s down from a spring high of more than $1.70 a litre, but still a lot more than the 87 cents a litre that folks in Calgary are paying.
It’s a common lament by now and one that continues to infuriate those living on the West Coast. People here have long suspected they were being unfairly hosed and were doubtless gratified to have those suspicions confirmed by an inquiry launched to investigate the matter.
The British Columbian Utilities Commission recently delivered its report to the provincial government, which included the central finding that British Columbians were being overcharged by at least 13 cents a litre – or almost a half-billion dollars a year (an amount that is independent of various taxes applied at the pump). And while the commission did not find any direct evidence of price fixing, it did conclude that petroleum suppliers operated like an oligopoly; a small number of players presided over a less-than-competitive pricing environment. The result: People are being gouged.
The commission admitted it could not explain the 13-cents-a-litre mark-up that exists in the southwestern part of the province (it’s only six cents in the north). I’m guessing NDP Premier John Horgan hopes the unfavourable attention this report has brought to the issue might scare oil and gas suppliers in Alberta into recalibrating their wholesale prices to offer B.C. customers some relief.
However, that may be wishful thinking.
There are a number of factors that underlie the current predicament confronting B.C. motorists. B.C. has been receiving condensed shipments of gasoline through the Trans Mountain pipeline, booked up as it’s been with Alberta crude. In the absence of firm rules around allocation, there is no guarantee that even the controversial twinning of the pipeline will offer any supply relief. Another possible solution would be building more refining capacity in B.C., including storage and delivering terminals. But that process would be politically fraught and would surely incite fierce protests of which an NDP government would want no part.
The relief option that has been getting the most attention is government regulation of the market, something that is done in the Atlantic provinces, with mixed success. Mr. Horgan does not appear to be a fan of that idea and has pretty much nixed it as an alternative.
At the moment, the New Democrats are awaiting the oil and gas suppliers’ response to the report. Those same suppliers continue to insist there is no collusion on prices, so I don’t anticipate that anything they might say will change that narrative. Perhaps, the government needs to get a little more heavy handed with them, maybe insist they share information around retail margins, something they refused to do with the commission citing “competitive sensitivity.”
That certainly is convenient. But it doesn’t change the fact that a small handful of producers are effectively selling to themselves in 75 per cent of B.C. gas stations. These stations are bound by contracts and the price language contained within. (The notion that these retail outlets are in any way independent, as the producers insist, is a myth). The reality is, the gas station owner has very little wiggle room when it comes to setting the price at the pump. Sure, they put up the sign informing customers what they will pay, but the numbers on that sign are fundamentally set elsewhere.
What the government should be doing is looking at the supply agreements between the gas stations and suppliers such as Suncor, Shell, Husky and a couple of others with an eye to seeing just how restrictive they are. And whether the language contained within is the real driver of the high costs British Columbians are facing. The commission report, while illuminating, doesn’t address some of the key factors driving the unconscionable price differentials we are witnessing in B.C.
Mr. Horgan’s government will soon have a decision to make as to what to do about it all. Just as he seems to be averse to regulating the market, neither is the Premier in favour of cutting gas taxes to offer relief – and rightly so. Why should the province subsidize profits being made by oil and gas companies?
I suspect there could be a showdown coming. Mr. Horgan has made making life more affordable for British Columbians the overriding mantra of his government. And going to war with oil and gas companies to make that happen might be a battle worth waging.
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