Why is gas more expensive in Calgary than Toronto? Retail experts weigh in
Calgary drivers might be asking why the price of gasoline is more expensive in their energy rich province where oil is refined and extracted than in Ontario, but one retail expert claims to have the answer.
Vijay Muralidharan, managing director of R Cube Economic Consulting, notes that a critical part of fuel availability at the retail level has a lot to do with fuel blending.
He says ethanol, required to blend with gasoline when filling vehicles, is seeing a dire shortage in Canada.
"We import almost everything from the U.S. by rail and the rail shipments have been delayed since March, meaning that the availability of ethanol into interior B.C. and Alberta has been constrained," explained Muralidharan.
"B.C. has access to coastal water so they can import ethanol directly from the U.S. via barges, but unfortunately Alberta does not have the luxury hence we have this issue of available fuel."
Retail margins for regular unleaded gasoline, which usually sit around eight cents per litre, have now more than doubled to the 20 cents per litre range in the last few days, supposedly to cover the extra costs.
According to Kalibrate, a fuel and retail analytics platform, retailers in Calgary are charging a 30.4 cent per litre marketing margin compared to 8.3 cents per litre in Toronto.
"The retailers in Calgary have to pay out of pocket to transport the ethanol and we don't know the cost involved in that," Muraldihran added.
"So, it's difficult to gauge but that has been the anomaly and usually it doesn't reach these levels. Our belief is that there's some sort of operating cost involved that's created this anomaly, hence you're seeing this divide in pricing."
But some other fuel analysts, including Dan McTeague, suggest western retailers from Manitoba to B.C. are price gouging and profit margins are much more favourable in the west than in Ontario.
Despite a 13 cent per litre gas tax that has been put on hold by the Alberta government since the beginning of April, prices continue to hover around $1.89 per litre.
"It's a full-on rip-off by gas bars unwilling to be reasonable," McTeague tweeted. "Gas in Alberta shouldn’t be selling for anything more than $1.75 per litre.
"There has been no time in the 28 years I've been doing this where retail margins were this high."
University of Calgary economist Trevor Tombe confirms that profit margins are higher than they were in recent days or the past week, noting that the 13 cent gas tax suspension has passed through consumers.
"So those margins have been rising, but they're also very volatile. They go up and down all the time," said Tombe. "It's certainly not fair to conclude that in the past week, retailers have been gouging or unfairly pricing or taking some of the gas tax removal.
"It's too early to know but that is an interesting development in recent weeks for sure. I mean, just a few days ago, oil was at $110 per barrel, now it's maybe $15 per barrel lower so things can change dramatically. That's always been true with energy markets, especially so today."
GAS CONSUMPTION OVERTAKING PRODUCTION
North American crude oil market analyst, Kevin Birn with S&P Global, says the global oil market is seeing higher prices because it's basically a "big bath tub where the drain has been running faster than we've been putting stuff into it."
"It’s gotten to a point where, frankly, the price signals telling people to consume less, and that's what (the market) needed to do,” said Birn.
"We needed to see that pullback and what we're seeing in the market right now is some indications that we might see some headwinds to oil demand, weaker economic growth forecasts, those sorts of things. That's why you're seeing the price of oil come down a little bit right now."
Birn adds that the other side of the equation is the refined product market, a separate market used to refine crude into gasoline, diesel, jet fuel and other consumer products.
"COVID accelerated the timing of which refineries would come down and delayed the timing in which new refineries come back to production," he said.
"So the refineries are running as hard as they can to produce as much as they can in North America and keep up, but frankly, we're consuming slightly more still than we're producing."
CTVNews.ca Top Stories
RCMP uncovers plot to sell drones and equipment to Libya
The RCMP says it has uncovered a plot by two men in Montreal to sell Chinese drones and military equipment to Libya illegally.
Demonstrators kicked out of Ontario legislature for disruption after failed keffiyeh vote
A group of demonstrators were kicked out of the legislature after a second NDP motion calling for unanimous consent to reverse a ban on the keffiyeh failed to pass.
Tom Mulcair: Park littered with trash after 'pilot project' is perfect symbol of Trudeau governance
Former NDP leader Tom Mulcair says that what's happening now in a trash-littered federal park in Quebec is a perfect metaphor for how the Trudeau government runs things.
Man wanted in connection with deadly shooting in Toronto tops list of most wanted fugitives in Canada
A 35-year-old man wanted in connection with the murder of Toronto resident 29-year-old Sharmar Powell-Flowers nine months ago has topped the list of the BOLO program’s 25 most wanted fugitives across Canada, police announced Tuesday.
Doctors ask Liberal government to reconsider capital gains tax change
The Canadian Medical Association is asking the federal government to reconsider its proposed changes to capital gains taxation, arguing it will affect doctors' retirement savings.
Keeping these exotic pets is 'cruel' and 'dangerous,' Canadian animal advocates say
Canadian pet owners are finding companionship beyond dogs and cats. Tigers, alligators, scorpions and tarantulas are among some of the exotic pets they are keeping in private homes, which pose risks to public safety and animal welfare, advocates say.
Thieves use stolen forklift to rip cash machine out of U.K. bank
Police in the U.K. are searching for a group of suspects seen on video using a forklift to steal a cash machine from a bank.
'There was a lot of black smoke': Crane operator sounds alarm while trapped during highrise fire in Halifax
A tower crane operator alerted emergency crews after noticing a fire on a construction site in Halifax Tuesday morning.
Cherry blossoms blooming in Canada: Here's what to know
There is a swaying sea of colour in some cities across Canada, and it's a sure sign of spring: cherry blossoms are in bloom.