The Great Oil Sands Journey Part 4

Everyone wants a piece of the plump pump pie

Now you know how bitumen is separated from the sand and then upgraded and refined into a specific product. Once the oil is refined into, let’s say, gasoline – because it accounts for about 40 per cent of the crude oil volume processed by Canadian refiners – it is ready to be shipped via pipeline and sold on the market.

Wells to Wheels
Part four of a five-part series

Before we get into the details of how gasoline goes from your wheels to the wind in the form of emissions, we should quickly address another important topic relating to the marketing of oil products, like gasoline…the price.

The cost of gasoline is like Calgary’s weather. You don’t like it, wait five minutes. It tends to vary from day to day and city to city for a whole host of different reasons. The most dominant reason for local price changes is local competition among stations. ‘Joe Fuel’, owner of ‘Pass ‘n Gas’ fueling station has a lot of factors to consider when he sets his price. He has to find a price that is high enough to cover all his business operating costs, such as the wholesale cost of the gas and rent. Yet he also has to find a price that is low enough to attract customers.

Now, if ‘Joe Fuel’ sees that ‘John Juice’, owner of ‘Pump ‘n Ride’, from across the street has raised his price a little, Joe is probably going to adjust his price accordingly. It’s only fitting that the price of something as invisible as gas would be dictated by the invisible hand… think grandfather of capitalism, Adam Smith. Think back to grade nine social studies and laws of supply and demand. Something as simple as having a refinery break down can affect the supply and therefore the price shoots right up. Every year we see evidence of this as summer gas prices hit a peak when refineries close down temporarily for annual maintenance (decreasing supply) and everyone gets revved up to go on road trips (increasing demand).

If those factors aren’t enough, consider that wars can affect the supply of oil to Canada, and extreme weather conditions, like Hurricane Katrina, can affect both the supply of oil and gasoline.

“Ultimately, the full price you pay at the pump can be broken down into three components: 24.1 per cent goes to refining and marketing, which is all the stuff we just talked about, like operating costs and margins. 46.2 per cent is crude oil costs. Finally, the last component is as certain as death…taxes. The government also getst a piece of the pie…31.9 per cent to be exact.”

Next week: Wheels to Winds – Idling cars are the devil’s greenhouse