83 entries categorized "Gas Pricing"

Not just the taxes: other factors that contribute to the fluctuating price of gasoline

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.

Cute Sharpei

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.

Pumping Gas at Petro-Canada

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.


Gas Prices over the Holidays

Santa-at-gas-pumpNow 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 4th 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.

KentGroup-GasolinePrices-Q42017

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).

Gas Prices in YVR and YYJ

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-data
2015: Victoria flat over the holidays; Vancouver had a slight increase heading into the new year.
2016-data
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-data
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-data
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.


Gas Prices and Long Weekend Prices Refresher

Long Weekend gas prices

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).

Gas prices year over year

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.


What's the Deal with Diesel Prices?

Diesel

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.


What’s Behind Gas Prices?

You likely saw the articles on your favourite news sites yesterday, or heard the radio reports on the way to work. The price of crude went up around 3%, largely based on the news of the Iraq insurgency and the potential of oil supplies being disrupted. And when crude goes up, the cost of gasoline at the pump is at risk of rising as well.

You’ll often hear examples of the factors which effect the price at the pump. Natural Resources Canada lists the following price influencers:

  • Changes in world crude oil prices
  • Availability of supply to meet demand
  • Local competition among retailers
  • Seasonal demand
  • Inventory levels

Given the impending water cooler talk, we thought it may be helpful to provide a little context on a few of those factors.

Commodity Market Fluctuates Daily
Gasoline and crude oil are commodities - they are bought and sold at prices determined by commodity markets. It's like when we plan a trip to the US: depending on the day, we will pay a different exchange rate for our Canadian dollars; that exchange rate is determined by currency markets.

Similarly, on the commodity market, the wholesale price of gasoline changes daily, depending on the market's reaction to the price factors above.

Effect of Wholesale Gas Prices on the Price at the Pump
Wait, why do we care about wholesale prices for gasoline rather than the retail price? At Suncor, we produce and sell gasoline from our refineries, but we also purchase gasoline on the wholesale market to round out our supply and make sure that all of our stations (and customers!) have the required fuel. The wholesale market's prices are set on a daily basis (you can track the daily wholesale market price on Natural Resources Canada's site).

So for all the gasoline that we produce and sell, we follow the accepted daily wholesale price set by the market. You can read more about the relationship between gas prices and commodity prices in a previous PumpTalk post.

- Corinn S.