Gas prices rose with land costs but full differentials unexplained: report
Published Thursday, July 11, 2019 9:01AM PDT
A leading think tank believes Metro Vancouver drivers are being gouged by Alberta fuel companies, and wants the B.C. government to intervene.
VANCOUVER - Gasoline prices in British Columbia have risen in line with land costs and credit card processing fees but that doesn't fully explain why they're so much higher than in other parts of Western Canada, a new report says.
The report by Deetkten Group was posted online late Wednesday by the B.C. Utilities Commission, which is overseeing a public inquiry into sky-high gas prices in the province.
The consultant's report says Vancouver's gasoline retail margins, which are the difference between the wholesale price for fuel and the retail price less tax, “highly” correlates with local land values.
It also says credit card processing fees are applied as a percentage of a total transaction, meaning the fees will be higher in jurisdictions like Vancouver where prices at the pump are already high.
“Rising land costs and credit card processing fees may account for nearly the entire differential observed between Vancouver and comparable areas, at least up to the end of 2018,” the report says.
But even after those factors are taken into account for this year, 1.4 cents per litre in the retail margins remains unexplained.
The report also can't fully explain why wholesale gas prices are much higher in B.C. cities compared with other jurisdictions.
The consultants compared wholesale prices in Vancouver and Kamloops with Edmonton and Seattle, which are also sources of supply for B.C.
Transportation and regulatory costs may account for higher wholesale gas prices in B.C., but even estimating those costs at their highest potential doesn't explain the difference, it says.
“Even the highest estimates of transport and regulatory costs combined do not sufficiently account for the differential in wholesale prices between the Vancouver market and the Edmonton and Seattle markets, particularly in 2019,” the report says.
A differential of about five cents per litre between Vancouver and Edmonton this year is unaccounted for in the report.
Unlike gasoline prices, diesel prices have remained largely consistent with historical trends when compared with other parts of Western Canada.
“This may be in part due to different demand dynamics in the diesel market,” it says.
Premier John Horgan ordered the inquiry in mid-May as the price of a litre of regular gasoline climbed above $1.70.
In commissioning the probe, he said that gas and diesel price increases were “alarming, increasingly out of line with the rest of Canada, and people in B.C. deserve answers.”
Four days of oral submissions are to begin next week and the three-member panel can question industry representatives, including gas and diesel suppliers.