Here is why gas prices are not rising in BC, despite rationing

On November 26, crude oil prices fell more than 10 percent, representing some of the largest declines since April 2020.

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BC motorists who see signs showing 0.00 to signal when a petrol station has run out of day may wonder why prices have been so stable during this time of tight fuel supply.

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The province’s gas rationing order to ensure there is enough fuel left for key vehicles has been extended from 1 December to 14 December. Drivers of non-essential vehicles will continue to be limited to filling 30 gallons of gasoline at stations across the lower mainland, Vancouver Island, Sunshine Coast and Gulf Islands.

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The province hopes this will allow more time for the Trans Mountain pipeline to become operational. The pipeline is normal supplies more than 85 percent of the fuel, and crude oil to produce fuel, to these areas.

On Wednesday, Trans Mountain said in a press release that “provided there are no further setbacks from the latest round of rainstorms” and “based on the amount of progress we have been able to make, we are only a few days from to restart reduced capacity pipeline. “

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Gas is being barged in from the United States, and some railroads have been restored, bringing fuel to the Vancouver area, but they can only make up so much of the supply.

Meanwhile, there are two reasons why gas prices have not risen much, according to Kent Fellows, a professor at the University of Calgary’s School of Public Policy.

“The BC government has limited the ability of wholesalers and retailers to increase prices,” he said, pointing to a ministerial order.

Specifically, it states that wholesalers and retailers may not sell fuel that increases their gross profit more than the gross profit obtained for that type of fuel within 90 days immediately prior to the date of the order, which was November 19th. .

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The average weekly retail price of regular gasoline in Vancouver went from 162.6 cents per gallon. liters per week on November 16 to 160.4 cents per. liters the following week, when the rationing order was implemented, to 158 cents per liter. liters this week.

Fellows notes that the order limits the gross profit, but not the prices themselves. This means that retailers are allowed to pass on changes in wholesale prices to consumers, but it is not clear what costs wholesalers are allowed to pass on to retailers.

“It’s hard to know right now who will end up absorbing the higher shipping costs, but I would expect it to be a combination of wholesalers and consumers.”

The second factor is that the price of crude oil fell at the end of last week due to concerns about the new Omicron COVID-19 variant. On November 26, crude oil prices fell more than 10 percent, representing some of the biggest declines since April 2020. But the following Monday this week, they rose and accounted for about half of this loss.

“The problem for coastal BC remains that the cost of getting petrol from the refineries to the wholesale distributors is much higher than it was before the floods, as they cannot use the cheap Trans Mountain pipeline and are limited in their ability to import by rail. , ”Said Fellows.

For consumers at the pump, the tight supply may not mean higher prices compared to the period before the rationing order. But that may mean that prices are not falling as much as they normally would or should have given the fall in crude oil prices, according to Fellows.

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