You Think Canadian Gasoline Prices Are High?

Well, actually they are compared to what we’re used to paying, but compared to the rest of the world our gasoline is a bargain. And the reason isn’t that gasoline by itself is so expensive, it’s the taxes other countries put on gasoline. In fact throughout Europe, gasoline prices including tax are more than double the prices excluding tax.

On May 2, prices for gasoline excluding taxes ranged from a low of $0.95 per litre in the U.S. to a high of $1.02 in Italy. Taxes in the U.S. and Canada were $0.10 per litre and $0.39 per litre respectively, while taxes in Europe ranges from $0.88 in the U.K. to $1.40 in the Netherlands.

Where Does Your Gasoline Dollar Go?

There are three major components to gasoline pricing: crude costs, marketing and refining margins and taxes. And they vary according to world demand for, and supply, of oil; North American demand for, and supply of, gasoline; and where you live in Canada.

In 2009, when Canadian Par crude oil averaged $65.19 per barrel, crude costs accounted for 43.7 per cent of the cost of gasoline, taxes accounted for 33.2 per cent and refining and marketing accounted for 23 per cent. As oil prices rose in 2010, crude costs accounted for 47.3 per cent of the cost of gasoline, taxes for 33 per cent and refining and marketing 19.7 per cent. Thus far in 2011, Canadian Par prices have averaged $95.40 per barrel, and crude costs have risen to 49 per cent of the cost of gasoline, taxes for 30.8 per cent and marketing and refining 20.2 per cent.

The reason taxes have fallen as a percentage is that most of the tax is a fixed amount per litre. For example, the federal excise tax in gasoline is a flat 10 cents per litre, no matter the total pump price. The same is true for some provincial taxes.

Most of the regional differences in price are due to taxes varying from province to province and at time from city to city. In Edmonton, as in all of Alberta, there is no provincial sales tax. In cities such as Montreal, Vancouver and Victoria, there are municipal taxes and in Vancouver, there is a carbon tax.

Survey Says

A recent survey by IBM’s Institute for Business Value asked 1,716 U.S. drivers what would motivate them to switch from using a gasoline, diesel or hybrid vehicle to an electric-only vehicle. They also asked 123 auto industry executives to rate the importance consumers place on each choice.

The results are summarized as follows:

	Drivers	Executives
Innovative pricing models or lower price overall	71%	81%
Extended reach or range of the vehicles	64%	63%
Convenience of usage or services	63%	60%
Availability of charging infrastructure	62%	65%
Significantly higher oil prices	51%	76%
Green image or sustainability concerns	48%	33%
Government incentives or regulations	41%	73%
Traffic congestion	26%	11%

Although it’s surprising that, for the most part, consumers and auto execs are on the same page, what’s more surprising is that fewer than half the drivers were motivated by greenness and sustainability.

Isn’t that the whole point of electric-only vehicles? No emissions? Cleaner air? Other than that, what is the attraction to vehicles that are more expensive than their conventional counterparts, have smaller ranges and need expensive home renovations to convert garages and carports into recharging stations?

For one thing, operating costs are lower because electric vehicles are mechanically simpler and electricity is cheaper and more efficient that gasoline, but op costs weren’t even mentioned in the survey results. Hopefully, all the respondents were motivated by environmental concerns, but only 48 per cent said so.

If It’s So Green, Why Does It Burn Blue?

We’ve all been told that natural gas is the greenest of the fossil fuels. Greener than coal and greener than petroleum products. So why is this?

It’s all a matter of carbon, or hydrogen depending on how you look at it. Natural gas is primarily methane with lesser amounts of ethane, propane, butane, pentane and heavier hydrocarbons, nitrogen, water vapour, sulphur and carbon dioxide. Processing removes most of these other components so by the time the natural gas is actually heating our homes, it’s almost totally methane.

Methane is composed of  four hydrogen atoms surrounding one carbon atom – CH₄ – which means there’s four times as much hydrogen as there is carbon.

Other fossil fuels are made of more complex carbon and hydrogen molecules. Gasoline, for example, is made of molecules containing from five to 12 carbon atoms, arranged in linear chains, branched chains and rings. As more carbon atoms are added, the relative proportion of hydrogen decreases. The chemical formula for ethane, the two-carbon molecule, is C₂H_6, giving a hydrogen to carbon ratio of 3:1. In a 12-carbon chain, C₁₂H₂₆, the hydrogen to carbon ratio is 2.4:1.

Carbon dioxide is a by-product of burning fossil fuels. It is also a greenhouse gas which has been linked to climate change. The less carbon there is in a substance, the less carbon dioxide it produces when burned. Natural gas, being mostly methane, has the least carbon of all the fossil fuels.

On average, natural gas emits 53.06 kilograms of CO₂ per million British thermal units (kg CO₂ per MMBtu). Gasoline emits 71.62 kg CO₂ per MMBtu and diesel emits 73.15 kg CO₂ per MMBtu. Bituminous coal emits 93.28 kg CO₂ per MMBtu.

Because of its relative greenness, natural gas has been replacing coal as fuel for heat and power generation in both Canada and the United States.

And to answer the question: natural gas burns with a blue flame when well oxygenated. This results in more complete combustion.

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

The Great Oil Sands Journey Part 1

From waves to wells to wheels to winds

Next time you fill up your car to drive from Winnipeg to Waterloo, take a moment to ponder the full journey. Not your journey – the journey of your fuel, starting from the oil sands. Actually, let’s go further than that, beginning before the oil sands, when oil was just a sparkle on an oceanic wave.

Waves to Wells
Part one of a five-part series

In the beginning, and we’re talking hundreds of millions of years ago, the remains of tiny plants and animals, mainly algae, were buried in sea beds. As they became more deeply buried, they began to heat up at temperatures between 50 and 150 degrees, eventually turning into liquid hydrocarbons, sulphur compounds, CO2 and water. Some of the liquid hydrocarbons included “light” compounds, others included “heavy” compounds and the rest contained everything in between.

Next time you start to feel impatient when you’re stuck behind a slow driver, imagine how long it would have taken for this viscous oil to migrate from strata beneath the western sea, eastward and upward through 100 kilometers of rock until finally reaching and saturating the large expanses of sand and sandstones that we now know as Alberta’s oil sands. We’re talking about 50 million years.

Enter the bacteria who are, at once, the heroes and the villains of the natural world. Sadly, the heroic nature of bacteria, which are being tested in new technologies today to create biofuels, improve oil sand extraction efficiency, speed up tailings pond reclamation and to upgrade heavy oils into lighter, cleaner burning fuels underground, is for another story.

This particular story, on the origins of the oil sands, is about how the hungry bacteria feasted on the lighter hydrocarbons first, leaving the heavier ones and metal compounds that cannot be digested behind. To this day, oil sands bitumen contains the more heavy hydrocarbons, which is why they receive so much attention. It requires more energy to transform the carbon heavy bitumen from the oil sands into fuel for your car than it does to transform conventional crude. And, often, more energy equals more greenhouse gas emissions, particularly when the energy used is natural gas.

On the plus side, however, Canada’s oil sands are vast and bountiful, fueling not only North America’s planes, trains and automobiles, but our bustling economy as well. Who knew such tiny little critters bobbing aimlessly in the ocean would have such a huge ripple effect on how we power our lives today?

Next week: Wells to Wheels – Do I have to separate you three?

Prowling the Pumps – February 10, 2009

Canadian Gasoline Prices

Average across Canada

Another slight rise – up 1.7¢ per litre this week to 85.1¢. That gives us a cumulative price increase of 13.4¢ since the year began. In fact, we have seen price increases in five of the first six weeks of 2009. The good news is that the average price of gasoline in Canada is 19.1¢ lower now than it was one year ago.

Sizeable gains in Ontario (3.5¢ per litre), Quebec (3.2¢ per litre), New Brunswick (2.6¢ per litre) and Nova Scotia (2.9¢ per litre) were offset by a slight decrease in price in Alberta (0.3¢ per litre) and no change in price in Manitoba, Prince Edward Island, Newfoundland and Labrador, Yukon and the Northwest Territories, and only slight increases everywhere else.

Distribution of Gasoline Prices in 60 Canadian Cities
In five cities, six fewer than last week, prices were between 70¢ and 80¢ per litre; in 41 cities, two more than last week, prices were between 80¢ and 90¢; and in 13 cities, four more than last week, it higher than 90¢. In only one city were prices higher than $1.00 per litre.

Least Expensive Gasoline in Canada (per litre)

As one would expect when prices are rising everywhere but Alberta, Lethbridge, Edmonton and Lloydminster made it to the low-price five, ousting Sudbury and Edmundston. And, again as one would expect, the low-cost five aren’t as low-cost as they were a few weeks ago.

Most Expensive Gasoline in Canada (per litre)

Victoria has the cheapest gas of the pricey five, at 92.9¢ per litre, and Lloydminster has the costliest gas of the low-price five at 79.9¢ per litre, a difference of 13¢ per litre or $10.40 per 80-litre tank. But, excluding taxes, the price difference is a mere penny per litre. The other 12¢ is the difference in taxes.

As mentioned above, the average price of gasoline in Canada has risen 13.4¢ per litre since the beginning of the year, while the price of oil has been trading in a narrow range between $40 US and $50 US per barrel. In the past few days, we have seen oil dip even lower due to higher than expected storage inventories, poor economic performance and dissatisfaction with President Obama’s bailout package. Consequently, the Prowler is forecasting cheaper gasoline in the near future.

We’ll see what happens in the coming weeks.

Pricing by Province

	Last Week	This Week	Change
BC	0.904	0.910	0.006
AB	0.798	0.795	-0.003
SK	0.882	0.887	0.005
MB	0.842	0.842	0.000
ON	0.809	0.844	0.035
QC	0.858	0.890	0.032
NB	0.807	0.833	0.026
PE	0.844	0.844	0.000
NS	0.851	0.880	0.029
NL	0.935	0.935	0.000
YT	0.869	0.869	0.000
NT	1.017	1.017	0.000

Prowling the Pumps – January 13, 2009

Canadian Gasoline Prices

Average across Canada

We start the new year with a reversal of trends. The average price of gasoline in Canada is on the rise – 5.2¢ per litre last week and another 0.9¢ this week. Still, it’s 28¢ per litre cheaper than it was last year at this time.

Provincially and territorially, increases occurred everywhere except Ontario and the Yukon. The biggest rise, 0.9¢ per litre, occurred in New Brunswick. The biggest drop, 15.1¢ per litre, in the Yukon.
This probably isn’t a trend – more on that later.

Least Expensive Gasoline in Canada (per litre)

Chicoutimi entered the low-cost five last week, and was joined by Drummondville this week. The remaining three positions are filled by the usual suspects from Ontario and Alberta. .Interesting to note that last year, when cities from Quebec were listed, they were usually in the pricey five.

Most Expensive Gasoline in Canada (per litre)

Whitehorse managed to avoid the pricey five this week as BC made inroads with Victoria and Vancouver.

So…the Prowler doesn’t see this price rise as the start of a trend. Oil prices are still bouncing around like a monkey on speed, one day rising above $40 US per barrel and the next sinking past $30 US per barrel. One day it’s the crisis in the Middle East causing prices to soar, the next it’s larger than expected inventories causing prices to plummet. OPEC cuts production, but the price still falls because, say the pundits, the market has already taken the cuts into consideration.

Meanwhile, gasoline is still reasonably priced, although the prowler did hear some grumbling at the pumps. Strange that a month or so ago we were dancing in the street because the price had dropped below 90¢ per litre, but now we’re grousing that it’s gone back up to almost 80¢. Did we get used to low prices that quickly? Or are we afraid we’ll have to put the SUV back in the garage?

We’ll see what happens next week.

Pricing by Province

	Last Week	This Week	Change
BC	0.827	0.860	0.033
AB	0.691	0.738	0.047
SK	0.749	0.839	0.090
MB	0.754	0.767	0.013
ON	0.773	0.764	-0.009
QC	0.760	0.777	0.017
NB	0.670	0.760	0.090
PE	0.689	0.743	0.054
NS	0.707	0.792	0.085
NL	0.818	0.887	0.069
YT	1.000	0.849	-0.151
NT	0.924	0.972	0.048

Prowling the Pumps – December 16, 2008

Canadian Gasoline Prices

Average across Canada

The average price of gasoline in Canada decreased for the 14th consecutive week. The drop wasn’t much, 0.6¢ per litre, but it was still a drop. It would have been more, but prices actually increased in some of the larger cities like Toronto, Ottawa, Montreal, Hamilton and London (the national average is population-weighted).

Provincially and territorially, decreases occurred everywhere except Quebec, which remained the same as last week. The biggest drop, 12.3¢ per litre, occurred in the Northwest Territories. The other big declines were in New Brunswick and Newfoundland and Labrador.

Least Expensive Gasoline in Canada (per litre)

For the first time since we began prowling the pumps, the price of gasoline in each of the 60 cities in the survey was below $1.00. In fact, in only one city does gas cost more than 90¢. And in six cities, it costs less than 70¢.

Big changes in the low-price five (actually six this week because of a tie for fifth place). Ontario cities have been largely replaced by Alberta cities. This is due to continued decreases out west combined with the aforementioned price increases in southern Ontario.

Most Expensive Gasoline in Canada (per litre)

Wishful thinking last week was that we’d all be paying less than a buck a litre before Christmas, and that came true this week. Labrador City, the most expensive of the pricey five, came in at $0.905. And this week marks the first time that five different provinces are represented in the pricey five. Timmins has the dubious distinction of being the first Ontario city to join that elite club.

Last week the Prowler wondered if we’d see a run up in oil prices prior to the OPEC meeting December 17. Well, it seems the opposite has happened – a price decline after the cartel announced a 2.2 million barrel per day production cut. Oil prices are now hovering just above the $40 US per barrel mark. It seems the market was expecting some large non-OPEC producers to announce production cuts and when that didn’t happen, it reacted in a seriously negative way. OPEC was hoping to stabilize oil prices between $70 and $80 per barrel.

And $40 per barrel might be one of those so-called “psychological barriers” above which the price bounces around a bit, “testing” the market until it finally breaks through, then plunges another five bucks per barrel over night. That seemed to happen on the way up; no reason why it won’t happen on the way down.

So, will the other producers fall in line? Will oil prices start heading back up?

We’ll see what happens next week.

Pricing by Province

	Last Week	This Week	Change
BC	0.841	0.804	-0.037
AB	0.738	0.697	-0.041
SK	0.801	0.782	-0.019
MB	0.791	0.771	-0.020
ON	0.766	0.757	-0.009
QC	0.798	0.798	0.000
NB	0.802	0.724	-0.078
PE	0.752	0.719	-0.033
NS	0.799	0.745	-0.054
NL	0.929	0.851	-0.078
YT	0.909	0.899	-0.020
NT	1.022	0.899	-0.123

Prowling the Pumps – October 21, 2008

Canadian Gasoline Prices

Average across Canada

Still dropping – 2.5¢ per litre this week to $1.044 per litre. Our hypothetical 80-litre tank was $2.00 less expensive to fill this week than last.

Gasoline prices slid everywhere except in the Yukon, where they stayed the same as last week. The steepest drop, 8.5¢ per litre occurred in Newfoundland and Labrador.

Overall, the average gasoline price in Canada has dropped 33.9¢ per litre since its all-time high of $1.383 per litre during the week of July 15. And this means that our hypothetical 80-litre tank now costs $27.12 per litre less than it did only three months ago. The reasons remain the same – declining demand for gasoline and cheap oil.

Least Expensive Gasoline in Canada (per litre)

Last week was first since we began prowling the pumps that there is one city in the low-cost five where the average price of gasoline was less than a buck. And the prowler predicted there was “hope for the rest of us yet”. I don’t like to boast, but this week, all five cities averaged less than a buck, including two from Alberta. And all indications are that this trend will grow. Interesting to note both Kingston and Ottawa saw slight increases in price, as did many cities in Ontario.

Most Expensive Gasoline in Canada (per litre)

The least expensive city in the pricey five finally dropped below $1.20 per litre, and the next three were all well below $1.30 per litre. And believe it or not, prices are dropping faster than they rose.

Last week we noted that the price of WTI had dipped below $80.00 US per barrel for the first time since last year. Well, since last week, WTI dipped below $70.00 US per barrel, and that hasn’t happed since June 2007. Not even the potential for OPEC to reduce production had much of an effect. So the big questions now are How low will it go? and How fast will it turn around?

We’ll see what happens next week.

Pricing by Province

	Last Week	This Week	Change
BC	1.169	1.162	-0.007
AB	1.073	1.007	-0.066
SK	1.153	1.102	-0.051
MB	1.137	1.111	-0.026
ON	1.062	1.045	-0.017
QC	1.120	1.088	-0.032
NB	1.110	1.067	-0.043
PE	1.166	1.049	-0.117
NS	1.111	1.088	-0.023
NL	1.277	1.192	-0.085
YT	1.249	1.249	0.000
NT	1.369	1.329	-0.040

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