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Crude Down. Gas Prices Up? Part 3

Crude Down. Gas Prices Up? Part 2

Hiddenkitten_aftab I've been getting a fair number of comments on my post from January 23rd, where I attempted to respond to the perception that gasoline prices had not dropped enough in relation to dropping crude oil prices.   Now, rather than wade in on each comment, I decided to watch the stream of comments to see where it would go.  Even after a year and a half, I'm still trying to figure out when it's right for me to respond and when to just let people talk.  Now I see some feel no one is paying attention, which wasn't my intent.  So Anita, Sophia, Jim and the others (especially you Cliff), let me provide further detail. 

Now one commenter, Orive even put my name in quotes ("Jon") which seems to question my very existence.  In my defence, my bio and picture is posted on this site.  And if I was going to make up a name, it would certainly be something cooler than Jon.  Or at least have an "h" in it so I didn't have to correct the spelling every time someone writes it down.

But enough about me.   I speak on behalf of an oil and gas company - Petro-Canada - so some of you may not wish to believe the things I say.  Or believe I exist.  Fair enough.  So let me bring in a few other people to this discussion.

The Halifax Chronicle-Herald talked to a number of people who are not part of the industry - but follow it very closely.  Let's start with Catherine Hay of MJ Ervin & Associates.

"As frustrating as it seems for consumers, gas prices have dropped with the price of crude oil," says Catherine Hay of MJ Ervin and Associates.

Crude oil prices have dropped from record highs of almost US$150 a barrel last summer to the US$35 a barrel range, leaving some consumers to question whether retail gasoline prices in Nova Scotia have come down proportionally. Ms. Hay said gas in Nova Scotia, which is now selling for 88.9 cents a litre, cost 82.9 cents a litre in April 2004, when crude last sold for about US$35 a barrel.

"It’s a little higher," she said, attributing the six-cent-a-litre difference to today’s higher refinery margins.

In the same article, Dale Madill, who watches the price at the pump closely for the Nova Scotia government adds that crude oil and wholesale gasoline are two distinct and seperate commodites.

 "...there is no economic basis for the theory that gas should be priced at a penny for every dollar that a barrel of crude costs. "That relationship doesn’t exist," he said, except coincidentally."

In a article from yesterday, Spencer Knipping, who does a similar job to Mr. Madill for the Ontario Government, elaborated on the impact of the higher wholesale gasoline prices.

"The wholesale price for gasoline has actually increased by quite a bit since late December, and that has put upward pressure on the pump price," Knipping said. "And that's happening despite lower or stable crude oil prices."

Over at the Federal level, Natural Resouces Canada continues to track all kinds of worthwhile data on fuel prices.  There's plenty to read on the site, but I'd like to share their chart below.

Crude Oil and Regular Gasoline Price Comparison
(National Average)

2009 Gas Crude Wholesale 

While wholesale gasoline prices have been putting upward pressure on the price at the pump in recent weeks, you can still see that gas prices and the cost of crude have both risen and dropped this year.  But, as those who follow the industry closely will tell you, it's not the only factor to consider. 

This is all very similar to what I said back in January, but I hope it answers some of your questions or at least responds to some of your concerns.

Thanks and keep the comments coming.


Photo Credit: aftab  (This one's for you Hazel)


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Thanks Jon for the information, but its the same old stuff(BS)just a new twist to the story. All the info in here are from people who work for or are in bed with big oil companies. Nothing new to report as per normal.

Don Logan

It's funny to me that, when the world price for oil was high, the gasloine price had no trouble whatever in staying in step with it; one cent per dollar (more or less). It is only since the world price has come down that all these "other factors" have begun to rear their ugly heads! What (or who) controls the wholesale price for gasoline, and why haven't we heard of this before now? If the issue is "lack of refinery capacity", why can't the oil companies build new ones? The present ones are reputed to produce very "dirty" gasoline as it is (high sulphur content etc. - relative to many other nations of the world). The word on the street is that oil companies have persuaded the lawmakers, through "environmental groups" to outlaw the construction of new refineries, and so they all sit back and smile a lot! Strange...I don't see the humour in it!

Jon Hamilton


Most of the folks I quoted are from the government - one of which regulates and sets the price for their province (Nova Scotia). They took over pricing but have to follow the same commodity price realities we do when prices are set. We can't all be peddling BS.



Price fixing,greed,smoke and mirrors.
It is apparent no one is buying your spin.Record profits during an economic meltdown make it difficult to not believe the fix is in and every Canadian is paying the price .There will be a wild cheer from all Canadians when the truth comes out and the monopoly and collusion is exposed for what it is.
How else are huge profits explained?


I see price fixing!
The wholesale went up a couple of cents here on the west coast and over that period the gas went up 24 Cents a litre
And now as a pathetic gesture it went down 4 cents WOW What a deal.
95.9 Victoria

Jon Hamilton


Wholesale gasoline has been a commodity for many years and the influence it can have on gas prices has been the subject of many of my posts on this site. It was actually one of my first posts, back in 2007. The link is below.

As for your question about refineries...they cost billions to build and haven't shown a great return - other than a few blips over the last few years - to justify the expense. Most in the business have invested in existing refineries to get more out of them. As for your comment about dirty gasoline, that's rubbish. Canadian fuels have some of the lowest sulphur content in the world. That's because billions were spent by the industry to remove sulphur from gasoline and diesel - a worthwhile investment, but one that meant little free capital for refinery expansion over several years.

For more on sulphur, go to

For a post on the various factors influencing gas prices, try:

Thanks for your comment.


Jon Hamilton

Doug and Jim

To answer your question. The Canadian oil industry does not set the price for oil. That's set by the markets based on global factors. Yes, we benefit when the price goes up, but there is also nothing we can do when the price of crude goes down, other than lower our prices. Which we did.

As for Victoria, I don't know your points of reference but the increased wholesale prices and the sagging dollar are keeping the upwards pressure on prices.




No back in January we talked about how currency fluctuation influenced prices. How does this affect that chart you are tracking gas prices in cents per liter over time so your y axis is actually variable a cent in Dec is not a cent in Jan per say. I would contend that pump prices are set to maximize profit # of iters times price = x as price goes up the number of liters sold drops find the max. Depending on the rate that demand falls off will set the price. Until the crude producers put pressure on the refineries and distributors to lower the price and increase crude demand thus raising the price of crude. Of course this theory falls apart if the producer and supplier are the same entity. I suspect that the refineries are making some good money with the price of crude low and the pump price relatively high. If these refiners are also producers this will allow them to make up for low crude prices.


How does this explain the enormous increases to the oil companies profits? Every quarter, the profits have increased in a billion dollars or more from the same quarter only a year ago. I also notice that the price of crude goes down say today for example, but the price at the pump will stay high for days or weeks since the price of crude went down. All the rhetoric on how the markets and the global economy determine the price at the pumps is all BS. You are only trying to brainwash your customers in believing just that. Their is no competition to speak of, if there was the prices at the pumps would not be the same at every gas station. I just know that the oil companies, refineries and the government are all in bed together so to gouge as much as they can.

Greg Greason

I still don't get it! Back last summer when oil was hovering about the $150/barrel mark, we were paying about $1.40/litre for gas.

Lately when the cost of oil was below $40/barrel we were paying about $0.75/litre.

Given that oil is now about 25% of it's historic highs, shouldn't we be paying roughly the same percentage ratio for gas? ($1.40 x 25%) = $0.35


Does anyone remember the word "competition"? Strange how all the gas companies' prices are consistent across the city. The few remaining independents (there aren't many left, big oil bought up all the competition) are only pennies or fractions of pennies lower? Do the head honchos get on the phone to each other every day and determine the price we are going to pay?


What gives? Simple business and math gives. It does cost to refine, produce, administrate, and transport the fuel. Imagine it cost $.58/litre to do this... Crude oil at $35/barrel=$.22/litre, then add the $.58 costs given above and that gives us a final pump price of $.80/litre.

Doing the same thing again if the crude oil prices were to go up to $150/barrel=$.99/litre the final gas price is now $157/litre.

This value is $.17/litre higher than reality a year ago, giving the impression that if they could do it for less then why not now. Three reason come to mind (some previously mentioned on this site):
1. Value of the dollar (could make up most of the difference).
2. Shipping costs went up and have not really come back down.
3. Inflation / economy.

Note that because of these fixed overhead costs you will never see a direct correlation between pump and crude oil prices. It is impossible.

If you want gas at $.50/litre... buy a can of beans.


Wow Glenn thanks for your insight comparing gas to beans. You must have more knowledge about prices than the rest of us dumb hicks. Wait a minute you could be an undercover PR guy for Petro Canada. In our neck of the woods Petro Canada has raised the prices by more than 23 cents a litre since 6 Jan 09. Today some drove the price up by 7 to 10 cents. Petro Canada was the first as per normal. Last week it dropped by 4 cents so why the big increase. Remember Petro Canada's motto " First up last down"


Thanks Cliff you are right, I voided myself when I added the beans.

I just get tired of the fact that the customer can make fun of, call names, and accuse the store/producer as much as they wish and often with little knowledge of what it takes to bring a product to the customer. And through it all the business can say nothing... the only thing they can do is continue to make money and few enough businesses are able to do even that.

My thought was really an exercise for myself that makes the gas prices in my area look like they right on the mark. I do not know why your prices are what they are.

pierre blancard

I'm still waiting for an answer to my complaint concerning why Petro Canada dropped the three cent promotion discount basically right after gas and crude oil prices came down.What's wrong...the company didn't make enough profits last year off our backs? How about a straight answer instead of giving us all a bunch of excuses.. Pierre

Gareth Skipp

There's a key element in why gas prices have gone up. The industry has not invested its considerable profits in new refineries in years. The "demand" is often manufactured by the industry itself. We're paying more because the industry wants to maintain high profits and justifies it by saying publicly that "demand" is high. It's a deceitful practice. While demand has increased, refinery capacity has not. That's a fact. It's also a myth that the oil industry in North America practices "competition." Really, retail gas prices are virtually the same, in most communities, varying by only a cent or a fraction of a cent. By varying retail prices even fractionally, the industry can maintain relatively high prices and spout they are "competing." But really those prices are far higher than they were the last time crude oil was only around $50/barrel. But it doesn't really fool many of us. We're in an oil producing nation where oil companies rip off the citizens of that nation. They just blame the price on "world" markets.


i am wondering why we have the most priciest gas at the pumps than the othe countries around the word?maybe these guys think we have more money than the other countries people!


How does the price of a barrel of oil go down, and yet, the price at the pumps go up? It can't be the dollar difference to the U.S. I would be very curious as to the "reasons" how the price increase can be justified. I'm sure it's not gouging. If it was, our reliable government would put a stop to that in a heartbeat......or maybe they're in on it? Hmmmmmmmmm.

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