British Columbia

Lower taxes, more government regulation? Experts weigh in on gas price inquiry

The B.C. Utilities Commission has concluded there's no clear reason why gas and diesel prices are so much higher in British Columbia than the rest of Canada, but experts say they are not surprised by the commission's findings.

A public inquiry into gas prices in B.C. found an 'unexplained difference' of 13 cents per litre

'The Rocky Mountains are a magical barrier to logic … as far as prices are concerned,' said Roger McKnight, chief petroleum analyst with En-Pro International Inc. (Evan Mitsui/CBC)

The B.C. Utilities Commission has concluded there's no clear reason why gas and diesel prices are so much higher in British Columbia than the rest of Canada, but experts say they are not surprised by the commission's findings.

A months-long public inquiry, requested by Premier John Horgan when prices at the pump hit record highs in the spring, found there is a "significant unexplained difference" of about 13 cents per litre in gas prices between southern B.C. and other parts of the Pacific Northwest.

"I can explain that [price difference] quite well," said Roger McKnight, chief petroleum analyst with En-Pro International Inc.

"There is a misconception that prices in Canada are made in Canada. Prices in Canada really follow the wholesale prices in the United States."

The findings of the B.C. Utilities Commission public inquiry into gas and diesel prices were announced Friday morning, just as gas prices surged ahead of the Labour Day long weekend. (Maggie MacPherson/CBC)

That means prices in southern B.C. follow the up-and-down movements of prices in the U.S. whereas northern and interior parts of the province are more aligned with Alberta, he said. 

"It's a completely different market," McKnight said over the phone from Billington, Ont.

"The Rocky Mountains are a magical barrier to logic … as far as prices are concerned."

The commission looked at different factors that may have been influencing prices at the pump since 2015, such as profit margins, impacts at the refinery level and competition. 

Despite finding that the retail market can be controlled by five refiner-marketers, the report concluded there is no evidence of collusion among the retail operators or of cartel behaviour.

David Morton, CEO of the British Columbia Utilities Commission, presents the key findings from the BCUC’s Inquiry into Gasoline and Diesel Prices on Friday morning. (Maggie MacPherson/CBC)

'Goodness gracious' — the taxes 

The report doesn't look at taxes as a price driver, though, instead focusing on wholesale retail prices set before taxes are added. 

McKnight said the tax structure certainly plays a role, however.

"Goodness gracious, the tax is 53 cents in Vancouver and it's 28 [cents] in Calgary," he told CBC's B.C. Today.

"If the consumer wants lower prices in the Vancouver area, may I suggest you have more than one refinery serving the Vancouver area and perhaps maybe you could lower the taxes." 

The BCUC investigation looked at evidence from 11 interveners, including all major companies that have refining and retail business in the province, and concluded the province's market is not truly competitive.

A woman fills up her tank at a Metro Vancouver gas station. (© Evan Mitsui/CBC)
  

Marc Eliesen, an independent economist, was one of the interveners in the gas price inquiry. 

"The commission basically found that the B.C. market is highly concentrated, that the barriers to entry are significant and that the price of gasoline is not determined by competition," Eliesen said. 

He suggests government regulation is needed to stabilize the out-of-control, volatile prices at the pump. 

"What we had recommended to the commission is that the area of price regulation be explored as a method of controlling the excessive increases of the volatility," he said. 

"The commitment obviously has to be made by the responsible government, so it's up to Premier Horgan now." 

With files from B.C. Today

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