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Update: Western Canada Diesel Supply Situation

Is the drop in crude prices being reflected at the pumps?

First of all, the answer is yes.  Gas prices have been dropping across coinage chealion the country the last few weeks as crude oil prices have dropped, but not as much as most people would like based on the calls I’m getting.   Commodities, like crude oil, are priced in US dollars.  Therefore when the Canadian dollar drops, so too does our purchasing power.   Just like it does when you head to the US outlet malls across the border.   Let me explain.

It’s July 2008 and your teenage son bounds in to tell you the running shoes he needs/wants are only $100 at the outlet mall located just across the border.  These particular shoes are only available in the United States and, according to your son, are a great deal.  He knows this because his best friend just came back from a weekend trip with his family to the US and they purchased the running shoes.  To further entice you, he reminds you that the Canadian dollar is pretty much at par with the US dollar, so it’s an even better deal.   You agree to go together when you have some time.

It’s now October 2008 and your teenage son once again bounds in to tell you the US outlet store is now selling the running shoes for 15% off.  What a deal!  So you decide to head south that weekend.   Trouble is, when you head to the bank, you find out that the Canadian dollar isn’t worth what it was in July.  In fact, with most of the drop in the dollar occurring in the last few weeks, one US dollar now costs you 15% more in Canadian funds.  If only you had gone sooner.   You head across the border and pay $85 US for the $100 shoes which seems like a great deal to your son.  But once you factor in the exchange rate, they actually cost you $97.75 Cdn for a grand savings total of a Toonie and a quarter with a moose on it.   

So when is this going to tie back to gas prices?  Well, we don’t cross the border to buy crude oil at The Refinery Barn or Crate & Barrel, but it’s not that far-fetched.  The price for commodities like crude oil – regardless of where they come from -  are set by the US commodity markets in US funds.   So when the Canadian dollar falters, it weakens the purchasing power of Canadian refiners.   That means that while the price of crude oil has been dropping, the cost to purchase it has also increased.   For those looking only at the price of crude oil, the drop in the pump price will therefore be a disappointment.

Now before the comments come in accusing the oil & gas sector of taking advantage of the drop in the Canadian dollar, read my post from a year ago.   At the time, the surging Canadian dollar was sheltering Canadians from some of the gas price spikes being caused by the dramatic rise in crude prices.  As changes to the commodity price can be quickly reflected in the pump price, the improvements in the Canadian dollar were also felt quickly.  In a study on the subject, Natural Resources Canada stated "...due to competition in the North American gasoline market, Canadian gasoline consumers, and not the refiners, have benefited from the lower wholesale gasoline prices resulting from the stronger Canadian dollar."    

So while the rising loonie sheltered Canadians from rising crude prices for the last year and a half, the recently sagging loonie has slowed the drop in prices that one might have have expected if they just looked at the price of crude. 

Photo Credit: Chealion


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Once again Jon I told you before you should run for the Liberal Party they tried to BS us with the Green Shaft , sorry shift, now you are using the falling dollar to justify the high cost of gas at Petro Canada,next you be telling us the the amount of snow falling in Canada will drive up the prices. So lie to us all you like we the people know better than the PR who work for the gougers.Petro Canada's motto " Frist up last down"

Moshu Dahg

What a crock.
Oil WAS in the $150/bbl range, now it is near $70/bbl, that is LESS THAN HALF!
The Canuck buck WAS at near parity, now it is in the low 80's, that's about a 15% drop
So, let me see, I WAS paying $1.30/liter, I SHOULD now be paying about $.65/liter, but, adjusting for the 15% Canuck buck depreciation..... hmmmmm, that STILL takes me no where NEAR the $1.10 that I paid today.

Jon Hamilton


The value of our currency not only impacts the price of gasoline but any other product priced in US funds. With gas prices, it's quickly reflected because of the tight connection to real-time commodity market changes while other products lag. Remember earlier this year when people were complaining that the high Cdn dollar wasn't being reflected in the price of many consumer retail goods in Canada? The higher dollar was keeping prices at the pump in Canada lower before those stories even started.


Jon Hamilton


First time commenter - welcome.

I put the following chart together on GasBuddy - not my favourite site but wanted to provide third-party information. You can see that Cdn pump prices didn't follow the crude spike up as sharply in 2007 due to the high Cdn dollar. You can also see they have come back down to where they were before crude started it's rise in 2007. You can find it here.




I agree with cliff. The gas companies are ripping us off. The reason they had for gas going up was the price of oil went up and they were pretty neck and neck on the incline.
Now that oil is going down the price of gas isn't keeping up with it. Everytime they have an excuse. Did they ever think that they would still make just as much money if they lowered the price of gas because people would buy more.
I don't know how they sleep at night....oh ya with all our hard working Canadians money.They should be ashamed of themselves and have to give a nation wide public appology


How is it that the drop of diesel price at the pump is not proportate to the Gas price drop at the pump?
Why does the drop of diesel price at the pumps always slower than the gas price?
I believe that with the higher price of diesel the transportation of all commodities especially food will always stay high.



I think you missed the first part of Jon's comment. We were paying $1.30, yes, but had it not been for the strengthening of the Canadian dollar at the same time crude prices were going through the roof, we would have really been paying much more than $1.30 (you'll recall that the Canadian dollar was not always at par). That is why your simple economics are flawed. And let's not forget the portion of the gas price that goes straight into the government's pocket...


I'm a first time commentator.
I totally agree the people are getting gouged at the pump. If it's the mentality that the CDN $ is to 'blame' this time, I don't get it. The loonie is roughly trading for 20 cents on the US greenback. Today the oil price is roughly $64/barrel. Add the 20% exchange and I get about $77 CDN for a US barrel of crude. So where's the difference going? Refinery's I guess. And the logic of how much we were paying when the loonie was near parity doesn't fly either. We were STILL paying MORE than equal amounts of gas/diesel in the US even with exchange! We run a dump truck and diesel was 10 cents/L cheaper the further away you got from our town of 115,000 so I don't understand that either. PLUS, that station gave a 5 cent per L coupon to use in their grocery store!! Canadians are actually paying MORE now than we did when oil was at $140/barrel. Then too, I heard yesterday OPEC is suspending production cause of lack of demand. First we use to much but that's ok as long as we pay for it at the pump...then we use to little and the price doesn't go to far down cause they're over supplied. Something is wrong with the calulations here...maybe the oil company employees attended the same business courses as the mortgage/banking gang. And I may add, the road tax portion collected at the pump isn't going where it should be either, as my road hasn't been touched in 20 yrs and it's a cowtrail. I'm sure there's a lot of others just like it around. But there again, the people are just supposed to pay their taxes and listen to these stupid excuses. Give us SOME credit! I can't wait to hear the next one, I need a laugh.

Brian Butcher


When I emailed you about the price of gas and the rapid rise when oil was at an all time high, you responded with the comment that gasoline was a commodity and we should regard it that way. Well, the price of oil has dropped like a rock and the price of gas has declined slowly and the $/liter at my local station is 12 cents cheaper than 50 km away.

Let's follow your logic. The price of oil rises and the price of gasoline rises sharply and instantly. We are told the reason for the increase in gasoline prices results from the increase in oil. Oh yes, gasoline is a commodity. The price of oil drops sharply and we are told that the price of oil was high and has gone down and we can expect and get lower gas prices. Yes, prices of gasoline dropped from $1.39/l to $1.17/l. That drop does not reflect the change in oil prices.

Now, if gasoline is a commodity as you insist, then please answer these questions clearly:

1. Why is gasoline so varied in price within a 100 km radius when gasoline is a commodity and prices should be very equivalent since commodity prices are not calculated in rural BC?

2. Why did prices rise sharply with an increase in oil prices and drop so slowly with the decrease to half their price/barrel six months ago?

3. How do you justify the record profits for Petro-Canada?

No matter how you cut it, the price of gasoline is outrageously high and Petro-Canada profits result from gouging Canadians!


Over $1 billion in profit sure sounds like gouging to me.


When the price due to a hurricane or snow storm or someone burped on the other side of the world is reflected at the pump over night, on gas already refined, paid for and in the ground. I am sorry thats not gouging! Its highway robbery. When all is well it takes days or weeks to come down. Look at the price of a Barrel now and the cost at the pump, then look back just a few years ago at the same, OK a little increase is understandable .... Wake Up People.

Nicolas Sauro

What I don't understand is why at a gas station in the A.M. it's 1.19/litre and then after an announcement made about the market it jumps to 1.29/litre. A gas station has a minimum of what-10,000 gallons in the ground produced at the old price. The price of the gas should not go up until the new crude bought at higher price is refined and delivered. Can you please explain this to me? Thankyou

colleen devison

Oil is below $40.00 a barrel with the 15% currency difference we'll say $46.00. So why are gas prices over 73 cents a litre. If that's not gouging what is?

Gareth Skipp

I was thinking that 88 cents/litre for gasoline was a rip off last week but today you (and the other oil companies) are charging 94.8 cents/litre??? Just because the barrel price of oil went up a few dollars?

When it was just over $50 a barrel, pump prices should not have been over 80 cents/litre based on historical data. The value of the Canadian dollar just went up too! Your spin doctors tried to tell us it was the value of the Canadian dollar that kept the price of gasoline so high. That arguement doesn't hold any water so what's your story now?

What's going on here? Do you think because it's less than the ridiculously high prices we paid last summer that the public will think 94 cents/litre today is okay? Is the strategy of your company - or maybe the slogan - opportunism, profit and pillage?

I know profits for oil companies this year are down. However, that just means to us that they went from astronomical (obscene!) to excellent. You still made billions of dollars!

I know you don't think Canadians understand the high prices oil companies charge for gasoline. I think we understand a lot. And Canadian families saw their standard of living go down as you pushed the price of gasoline higher. It's a despicable practice by all the oil companies.

You REALLY need to take a look at what you are doing to the world economy and be more responsible.

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