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So, it’s gas gouging: What next for BC gas prices? 

BY MARC LEE

Canadian Centre for Policy Alternatives

Among the key findings of the BC Utilities Commission (BCUC) inquiry into gas prices is that at least 13 cents per litre of British Columbia’s higher prices at the pump over the past few years is “unexplained” relative to what one would expect from a functioning competitive market. 

This is a polite way of saying gouging by oil companies has been rampant, at an estimated cost to B.C. drivers of about half a billion dollars annually. 

It’s time public policy stepped up to prevent more gouging in the future. 

The demand for gasoline in Vancouver and B.C. overall is fairly stable so it should not be difficult for a small number of suppliers to meet that demand and earn a reasonable profit without gouging consumers. 

Critics of the inquiry argued that examining higher costs from taxes and regulations should have been part of the terms of reference. In the case of taxes, there’s not much to see here: compared to 2015, higher fuel and carbon taxes explain about five cents per litre of the total increase in pump prices. 

In terms of B.C.’s Low Carbon Fuel Standard (LCFS), the BCUC found the LCFS accounted for, at most, four cents per litre of the difference between B.C. gas prices and elsewhere. 

The BCUC examined explanations from oil companies about higher costs of getting gas to market. Even after a generous accounting of these costs, however, there remained that “unexplained” gap of 13 cents per litre for wholesale prices (the price sold by refineries) over the past few years. 

Moreover, the timing of those increases allowed some to blame them on higher carbon taxes (which did increase in April but by only one cent per litre), and to argue just before the deadline for federal approval of the controversial Trans Mountain Pipeline Expansion (TMX) that it was needed to alleviate this situation.  

Consider it a winning trifecta for industry: boost profits, shift blame to the carbon tax and make the case for TMX. 

When markets do not perform as they should, there is a strong case to be made for regulation to better align their operations with the public good. BC’s next move should be regulatory reform to put a lid on gouging behaviour, stabilize prices for consumers and make the industry more transparent.

The BCUC already regulates electricity and natural gas prices and its mandate should be extended to gasoline. Even the annoying up-and-down swings of gas prices in Metro Vancouver on a weekly basis could be tamed by a more regulated market. 

B.C. should follow the Maritime provinces, all of which regulate the maximum price of gas at the pump. April gas prices (excluding taxes) in Halifax were about 30 cents per litre cheaper than in Vancouver. 

Claims that only the new TMX can solve Vancouver’s high gas prices ignore the vast amount of oil set aside for export on the existing pipeline. 

We need to ensure that refined fuel products from Alberta are guaranteed for Metro Vancouver and the BC south coast so we are not competing for space with exported oil on the existing pipeline. 

The federal government, owner and regulator of the Trans Mountain Pipeline, should step in to change the allocation rules so that Vancouver demand for fuel would be satisfied by domestic sources. With a federal election on, candidates should be asked whether they would make more refined fuel available to Vancouver drivers. 

Marc Lee is a senior economist with the Canadian Centre for Policy Alternatives, BC Office. The BC government struck the inquiry by the BC Utilities Commission after his research on gas gouging.


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