My weather app used to be the first thing I opened on my phone in the morning. These days, it’s GasBuddy. Over the last month, like the rest of the world, I’ve watched the price per litre rise quickly. And like the rest of the world (including my family who keep texting me about prices – give it a rest, Uncle Jim), I’ve wondered why.

Let’s break it down.

As you know, gasoline is refined from crude oil. And the price for crude oil, the price that refineries pay, is set on a global market. Not local, but global. That means that events and factors across the world, not just here at home, affect the price of crude, which in turn affects the price of gasoline.

I live in BC and most of our gasoline is refined nearby in Burnaby (BC), Edmonton (AB) or Washington state. It’s difficult to internalize that events halfway around the world impact the price of gas at my local station.

Supply and Demand

What events and factors have an impact? Any threat to the supply of crude makes the price go up – that’s the economic principle of supply and demand. Russia is one of the largest oil and gas producers in the world, so when the supply of crude that they provide to the world is put into question, as has happened with their invasion of Ukraine, the global market responds.

However, even before the conflict, another major factor was already putting pressure on the market: global demand for gasoline was on the rise. Across the world, we’re emerging from two years of pandemic restrictions. People are returning to workplaces, going out more, starting to travel again – en masse. But, during the pandemic when demand was significantly lower, several oil and gas companies across the world slowed down their production (including capping wells and laying off employees) to try to stay in business. Our global supply of oil was already low.

This combination of an accelerated demand increase plus an already low supply, which may become even lower, has created a perfect storm for an unprecedented rise in crude prices.

Not Just Crude Prices

In addition to the cost of crude oil, which makes up about half of the price of retail gasoline, there are three other costs that determine the price of gas:

1. Refining costs
2. Distribution and marketing costs
3. Taxes by federal, provincial and municipal governments (including a planned increase in the federal carbon tax on April 1^st ).

Inflation is at a 30-year high in Canada, surpassing 5%. This impacts the costs of goods and services. Higher inflation rates increase the cost of refining, distribution and marketing fuel; transportation is more expensive as are operating costs at both wholesale and retail locations.

What about taxes? The federal government in Canada taxes gasoline at 10 cents per litre. Each province has its own combination of sales tax, fuel tax and carbon levies which impact the price of fuel. And three municipalities – Montreal, Vancouver and Victoria – also apply taxes to gasoline. This is why per litre prices vary so much depending on where you live.

Alberta, beginning April 1^st, is going to pause their 13 cents per litre provincial fuel tax. British Columbia has indicated that they will not be pausing their tax, saying that it wouldn’t impact the cost of crude which is the main driver of fuel price increases. Prince Edward Island has announced a $20 million dollar relief package to help cushion the increased cost of living, including fuel prices.  Other provinces have not yet made any official announcements.

How Long Will It Last?

How long will gas prices remain at their current level is the question on everyone’s mind. And, like most things that affect the price of crude – it’s all about supply and demand. As long as Russia continues its invasion of Ukraine, and the global boycott on the purchasing of Russian crude continues, prices will likely remain high. We’re heading into the summer driving season, a period of typically high demand – which can keep gas prices high.

However, if refineries in the Middle East or North America are able to increase their crude supply – that could ease prices – but would likely take time as these facilities ramp up production which, as I mentioned earlier, had been reduced because of the lack of demand during the pandemic.

Saving Money on Gas

There are some small things we can do to help out with the cost at the pump:

• Use a credit card that offers savings at the pump (RBC cards an be linked with your Petro-Points number to save 3 cents per litre).
• Keep your car well-maintained
• Make sure your driving practices are fuel-efficient

Some Final Thoughts

As you can imagine, we get a lot of questions about fuel prices. Hopefully this post has helped clarify the complexity of the global fuel market and what goes into pricing fuel.

We’ve also been asked recently about the source of the crude that Suncor, the proud owner of Petro-Canada, processes into fuel. Suncor does not process Russian crude oil at any of its refineries. And the fuel you purchase at Petro-Canada is not made from Russian oil.

Do you have other fuel-related questions? Leave them in the comments below and we’ll try to get them answered.

~Kate T.

The other day I chatted with my dog walker, Karly, when she dropped off my very spoiled Sharpei, Effie Trinket. After filling me in on Effie’s ongoing dog park feud with a golden doodle, Karly commented that she might be temporarily raising her rates this summer because the price of gas has gone up quite significantly in Vancouver recently. You wouldn’t think a dog walker uses a lot of fuel, but each day Karly picks up several dogs all over the city and takes them to the dog park.

Now, we’re used to having some pretty high prices in Vancouver because of all the taxes that are added on to the price of fuel. But those taxes are pretty constant so the fluctuations are likely due to other factors.

In a fortuitous coincidence (or Facebook truly can read my mind), this really informative article about all the factors that go into the price of fuel popped up in my newsfeed. In it, Jesse Johnston lays out how factors like refining capacity, provincial emission standards and the value of the Canadian dollar contribute to the changing price of gasoline. Definitely worth a read!

- Rose R.

Now that I’ve got my Christmas gift shopping finished, I can really concentrate on what I love about the holidays: catching up with family and friends (oh, and the cookies and the fruitcake (yeah, I’m one of those nerds who actually LIKES fruitcake)).

For some, including me, the holiday season means some extra driving. I head over to Vancouver Island to visit my family for a few days over the holidays and that trip always means an extra fill up or two. Which can add up on my already over-burdened credit card. I started to get a little cranky when thinking about it “Why do gas prices always go up during the holidays?!” but then I wondered if they really do. So, I thought (nerd alert!) “Time for some data mining!” Warning: charts ahead!

The Kent Group is an independent organization that collects and shares data on (among other things) petroleum pricing. They issue a quarterly report on crude, wholesale and retail pump prices in Canada (please note the website is in English but newsletter reports are available in English and French). I looked at their 4^th Quarter report for 2017. According to their research, the average price at the pump for gasoline in Canada was lower in December than it was in November.

OK, so overall, the average Canadian price for a litre of fuel didn’t go up last year over the holidays. But what about earlier than last year? And what about in my specific location? We know gas prices vary from region to region, largely because of taxes; does my region’s holiday pricing hold consistent with the country’s?

The Kent Group collects daily pump prices from 70 cities across Canada (English only) and makes that data available on their website. They also provide tools to slice and dice the data. Using their timeline tool, I selected pump prices for the last 3 years (Nov 1, 2015 – Dec 12, 2018) in Vancouver and Victoria (note – I added the red dots to indicate the holiday season).

So, it looks like there are dips during the holiday season (the last 2 weeks of Dec for our purposes here). The Kent Group’s report from Q4 2017 mentions that historically the demand for gasoline goes down during this time of year, which often results in gasoline price drops. However, I wanted to drill down a little deeper. What happens in the month preceding and the month following the holidays? Conveniently, you can also download the raw data for any graph you create. So, I downloaded it and selected the data from Nov 1 thru Jan 31 for each year 2015-2018.

2015: Victoria flat over the holidays; Vancouver had a slight increase heading into the new year.

2016: Victoria flat in the early part of the holiday season, then heads into the new year with an increase; tough year for Vancouver, prices increasing since mid-Nov – not necessarily a holiday-related increase.

2017: Victoria had a tiny decrease (about 2 CPL) over the holiday and into the new year; Vancouver held steady over the holiday and then increased into the new year.

2018: both Victoria and Vancouver are on a downward trend as of the writing of this article (Dec 12, 2018). Hopefully this will continue, but it will be interesting to see what happens.

What conclusions can we draw? Gas prices may go down in the aggregate over the holidays per the Kent report, but not always consistently across every market (Vancouver seems to buck the national trend on a regular basis. Oh, Vancouver.). It’s important to be aware of YOUR market’s prices. You can download the Kent Group data for your area and see what trends occur there.

And just a quick reminder about the four key elements that influence the price of gas:

1. The cost of crude oil, including factors that can impact its cost, such as: severe weather, supply and demand, inventory levels, the cost of production, and global crisis;
2. Wholesale gasoline prices, which are influenced by factors such as: supply and demand, refinery maintenance, and weather;
3. Refining and marketing costs: including the cost of refining crude oil into gasoline, and then transporting and distributing the gasoline to local stations;
4. Taxes: each province has different fuel taxes. You can check the different tax levels at Natural Resources Canada.

Two of these factors (the cost of crude and wholesale gasoline prices) are commodities, meaning the value that traders place on these commodities changes based on market conditions. While you would think that crude oil and wholesale gasoline prices should move in the same direction, their prices are often quite different. For example, while the global supply of crude has been quite high (driving down the price of crude), the demand for local gasoline has also been high, which increases the price of wholesale gasoline. That’s why the price at the pump can remain high even when crude prices go down.

And because crude and wholesale gasoline is traded in U.S. dollars, the lower value of the Canadian dollar also has a role to play in why we see a higher price at the pump.

If you’re still with me at this point (that was a lot of information about gas prices!), thank you! We know that this topic comes up a lot over the holiday dinner table, so we thought we’d give you some information you can use. Oh, and remember my overburdened credit card? In case yours is too, just a reminder that when you link your Petro-Points card to any RBC credit card, you can save 3 cents off every litre of fuel at Petro-Canada. Now that’s some warming holiday cheer!

- Rose R.

DISCLOSURE: The Kent Group is occasionally engaged, on behalf of the Canadian Fuels Association, to provide independent third party research. Suncor Energy is a member company of the Canadian Fuels Association.

We've been getting a lot of questions this summer about fluctuating gas prices - and with the long weekend coming up, we're fielding the usual "Why do gas prices seem to go up right before a long weekend?" questions as well. So we thought we'd take this opportunity to discuss both topics in one post!

First of all, when it comes to long weekend gas prices, the idea that the price of gas is being artificially inflated right before a long weekend to cash in on holiday travel is a myth. Whether the price is going up or down, gas prices are always determined by the following (via Natural Resources Canada):

• Changes in world crude oil prices
• Availability of supply to meet demand
• Local competition among retailers
• Seasonal demand, i.e. the annual spike in demand for gasoline during the summer driving season
• Inventory levels

So what are some of the factors affecting gasoline prices this summer in particular? We got an update from our pricing team to give us some insight into the current state of gas prices.

1. The Canadian dollar. The world crude oil prices are lower recently and people want to know why they're not seeing those savings at the pump. Part of the reason is that our Canadian dollar has dropped significantly. The world crude oil price has also dropped, but it is priced in U.S. dollars - because the Canadian dollar has lost several cents in recent weeks, the corresponding rise in price for us to purchase crude oil cancels out much of the decline in the world crude price.

2. Commodity prices. Gasoline, like sugar and oranges, is a commodity - meaning that the commodity market determines the wholesale price, not your local gas station owner. Commodity prices for gasoline in the U.S. have remained relatively high over the past few weeks because of surging summer demand (miles driven is up sharply in the U.S.) and there have been some refinery issues this summer which have led to a tight supply. High demand and low supply in the U.S. have a corresponding impact on Canadian prices.

3. Tax increases. There have been some significant tax increases on gasoline in certain regions this year, for example in Alberta, and because of the Cap and Trade system introduced in Quebec.

4. Regional differences in pricing. Obviously pricing will vary from region to region based on supply, demand, local taxes and local competition between gas stations. Here in Vancouver, for example, gas is usually at least 15¢ more per litre than in my hometown of Edmonton, because provincial fuel taxes are higher and our municipality charges a significant transit tax on gasoline. For more information about how local taxes affect gas prices in your province, check out Petro-Canada's page about gasoline taxes across Canada.

5. Perception. When gas prices fluctuate frequently, it's frustrating but it may not represent a trend towards consistently higher pricing. Based on Kent Marketing's analysis of gas prices a few weeks ago, the average price of gasoline in Canada is still lower this year than last year (see graphic below).

For more information about how gas prices work, visit our Gas Pricing archive here on PumpTalk or our FAQs on Gas Prices. And for ways to save on gas and increase your own fuel efficiency, check out the Ways to Save on Fuel infographic.

That's a question that we've heard recently on a fairly regular basis: gasoline prices are falling, but what about diesel?

In order to answer this question, it's essential to understand about how diesel and gasoline are priced.While gasoline and diesel fuels are both derived from crude oil, they are separate commodities and priced independently in the North American markets. So they each have their own supply and demand fundamentals and these often move in different directions.

Gasoline is primarily a retail product and prices tend to jump towards summer as more drivers hit the road or go on long cross-Canada road trips.

In North America, diesel is more of a commercial product. We use it for road transport, industry, agriculture and heating. Prices tend to rise in the winter when demand is strongest - this is the time of year, particularly in Canada, where we use a lot of heating fuel and we transport more goods from farther away.

OK, that's the demand side of supply and demand. What about the supply side; how is it affecting diesel prices? Since the North American consumer market is a gasoline-dominant market, refineries are optimized for gasoline production. For example, a barrel of crude will produce 18 to 21 gallons of gasoline but only 10 to 12 gallons of diesel fuel; there is simply less product in a market that wants more diesel.

So while retail diesel prices have, in fact, fallen in recent months as the price of crude oil has declined, the price reductions are less than for gasoline largely because of the seasonal increase in diesel demand with production remaining consistent.

We've written a couple of other pieces on PumpTalk about diesel prices: "Global Demand and Diesel Prices" and "Diesel Prices". Also, this article in the Vancouver Sun has some additional information about falling diesel prices compared to falling gasoline prices.

Hope this clears up some of the questions you have about diesel prices these days. Do you drive a diesel vehicle?

- Rose R.