Crude Down. Gas Prices Up? Part 3
March 04, 2009
While world crude oil prices have dropped more than $90 US per barrel since mid-July 2008, there are some who believe that the price for gasoline does not fully reflect that decline. I've posted on it here and here and the comments show people still have some doubts. It's been a good discussion. Turns out it's not only happening here. Natural Resources Canada, in their most recent report, say they've received a number of "calls and correspondence...from Canadian consumers." As a result, they've put together a great synopsis explaining what's been going on. It's a short, but worthwhile read. I've selected a section below to share. It's a similar refrain to some of my previous posts. I've called it "Holler at the Dollar"....
"One of the main reasons consumers have not seen a similar decline at the pump has been the value of the Canadian dollar against that of the U.S. Prices for crude oil are set in international markets and based in American dollars. As crude oil is valued in U.S. dollars, the relative value of the Canadian dollar has a significant impact on prices that consumers pay for petroleum products such as gasoline and heating oil.
During the first six months of last year, the Canadian dollar was valued above that of the U.S. This meant the high crude oil prices—again valued in US dollar terms—that global markets were dealing with, were not fully felt in Canada. American consumers felt the impact of these prices more than Canadian consumers. The recent declines in our dollar have reversed the situation. As more Canadian dollars are needed to purchase goods valued in US currency, Canadians have not been able to fully benefit from the falling crude oil prices."
The full report can be found here.
Photo Credit: bubble dumpster
Has the Canadian Pump Price dropped proportionally to the US Pump price in the last year?
Posted by: Brent | March 05, 2009 at 02:19 PM
It seems to me we were all told that as oil futures drop so does gas at the pump!!Thats a crock now we know for sure that there is no regulation on this commodity and petroleum companies can charge what they like!!And the suckers have to pay through the nose.There was a time in the past when the most a ltr of gas would go up maybe 1 to 2 cents now they just pull any number out of thin air.Get used to it suckers.
Posted by: David John | March 05, 2009 at 04:38 PM
I guess my previous question doesn't make sense since Canada is a net exporter of crude it would stand to reason that high crude prices would result in a strong Canadian dollar. Since the US is a net importer of fuel a strong crude price would not stregthen the Greenback.
Posted by: Brent | March 06, 2009 at 05:58 PM
What I find annoying is that Canada produces enough oil to sustain itself.
Can someone tell me why we even need to import oil??
Posted by: Justin | March 16, 2009 at 11:05 AM
Ok Jon please explain to me why Petro Canada raised its prices today in Edmonton from between 4.5 to 7.5 cents a litre. I drive in the city for a living and noticed today that the 7 Petro Canada stations I pass each day were the only ones to raise there prices. I understand the gibberish(BS) that the PR people try to feed us, but since Jan 09 your stations have been the first to raise the prices. Thats nearly 30 cents a litre since Jan 09. I understand the Canadian dollar and demand for oil but at 0930 this morning all Petro Canada stations raised there prices first. Remember your motto Jon "FIRST UP LAST DOWN" Also since the 1 Jan 09 to 18 Mar 09 oil has been between $35 to $50us a barrel.
Posted by: Cliff | March 19, 2009 at 07:42 PM
Hi Jon,
Lets take another tack, and ask some pointed questions that you might be able to provide some honest numerical answers to...
From those small stickers on the pumps - "Understanding Gas Prices XXXX Canadian Average Pump Price", where XXXX is the year in question...
As a starter, I can't remember when the first of these went up, but I think it was 04 or 05. Anyhow, they usually show up in the earlier part of the year, so when is the '08 sticker going to come out?
Now the background for my questions:
On all the pumps now, the '07 sticker is the one that shows, and the pricing split is as follows (at least for here in Ontario):
48% Crude Costs
17% Refining & Marketing Costs
32% Taxes
2% Profit
(the fine print at the bottom of the sticker states specifically that this is "Petro-Canada Refining & Marketing Profit".
However, last week I happened on a pump that still had the 2005 sticker up - any guesses on the changes???
47% Crude Costs
16% Refining & Marketing Costs
35% Taxes
2% Profit.
Now for the questions:
1. Between '05 & '07, the PC Refining & Marketing PROFIT went up by 50% (2% - 3%). What does this represent as a dollar figure? (and it seems to me like that's one heck of a growth rate on the back of the consumers wallet)
2. Also, the fraction of Crude Costs went up by 1 percentage point (47% - 48%). Does Petro Canada, as a complete corporate entity, not just the Refining & Marketing arm, earn any profit on Crude which is contained within either the Crude Costs or Refining & Marketing Costs portion of the pie?
3. Assuming that answer to the above question is yes, what is the %Petro Can Profit on Crude Costs portion of the pie alone? And what is the fractional increase from '05 - '07 both as a percentage and as a dollar figure?
4. Given the massive price fluctuations during '08, I'm guessing that we might not actually see a pump side sticker this year as the Profit piece of the pie would show another drastic increase. Can you provide any of the '08 numbers here?
Finally, looking at the pie chart on the stickers, it becomes apparent that the stickers are meant to draw attention to how much Tax we pay on gas, as this is the only portion of the pie which is cut away from the rest. I gather this is meant to try and deflect the anger we feel at the pump when the prices fluctuate so wildly. However, of the 32% that makes up the taxes portion of the pie (2007), in Ontario the taxes consist of a $0.10/l Fed. Excise Tax (fixed), plus a $ 0.147/l Provincial Tax (fixed), plus GST - the ONLY variable tax... So when during a given year the price fluctuates from the $0.85/l range up to the $1.40 range, what's the actual tax fluctuation??? only the GST, which if at 5% means a for a change of $0.85 - $1.40, an increase of $0.55/l, only $0.0275/l of that change is related to taxes - the rest is ALL attributed to the remainder of the pie chart, a significant portion of which I can only assume is PC profit (and again, I don't just mean Ref & Marketing, but PC as a complete entity). I have to admit that every time I look at that sticker on the pump, I only get more annoyed with PetroCan, not the government, because of what is clearly a veiled attempt to pull the wool over the eyes of the customer.
Perhaps it might prove beneficial to us, if you were to show an example of profit (again PC Corporate, not just Ref & Marketing) on two daily price examples, one at $0.85 per litre, and the other at $1.40 per litre, rather than as an annual average breakdown.
Posted by: Rob | April 27, 2009 at 03:24 PM
Odd, but now that spring is well under way and a long weekend coming, the gas prices are rising. Talk about the public getting ripped off (once again)
Posted by: Risus | May 07, 2009 at 08:24 PM
It is amazing as a Canadian that lived in the states for years that they had lower insurance and WAY LOWER gas prices and we produce more oil then them. But I guess we the average Canadians can't find that out on our own. So shouldn't we have lower prices since we produce more like other oil rich countries. Why is it since we have changed to liters we are being gouged left and right. Because if you compare that we are paying 3.58 a gallon why in Buffalo they are paying 2.11 something stinks and somebody is ripping off the public. Please PR people try explaining away the 1.47 difference. It is time to have a gas revolt and by from elsewhere. or change to Propane.
Posted by: Dean | May 08, 2009 at 05:48 PM
in the past week, the price on a barrel went up $5.If barrel is 205 ltrs, the price of a ltr of gas went up .12 then that adds up to a $24 increase NOT a $5 increase..what a rip-off
Posted by: John Getchell | May 15, 2009 at 10:42 PM