Oil prices have fallen — so why is the price of gasoline skyrocketing across Canada?


The price of a barrel of oil has fallen by about 20 per cent in the past month, a situation that would normally result in a comparable decline in the price consumers see when they fill up their cars with gasoline. But imbalances between supply and demand have caused pump prices to move in the opposite direction, and the effect on Canadian drivers has been dramatic.

On a day when the benchmark price for a barrel of oil lost about a dollar, gasoline prices skyrocketed in parts of the country on Thursday, with Thunder Bay seeing average prices jump by as much as 20 cents a litre, and Edmonton and Calgary moved by a similar amount on Friday — even as the price of oil lost another 50 cents.

The pain is currently most acutely felt in British Columbia however, where the average price for a litre of gasoline is $2.39. That's the highest average price on record for any jurisdiction in North America.

While a lot goes into the price that drivers pay at the pumps, the main culprit in B.C. right now is a shutdown of one of the region's main refineries, reducing the supply of gasoline. But demand for drivers has held steady, which has jacked up the price of what's available.

Refinery shutdowns

The Phillips 66 refinery in Ferndale, Wash., was shut down for maintenance earlier this month, taking about 65,000 barrels a day worth of gasoline offline.

"B.C and Vancouver import every last barrel of gasoline and diesel from [that] region of the United States," said Vijay Muralidharan, an energy analyst with R Cube Economic Consulting Inc. "When the refining goes off, that amount of supply of gasoline gets shut."

Gasoline markets in North America are broadly divided into five zones, known as the Petroleum Administration for Defense Districts (PADD), according to the U.S. Energy Information Administration. Because supply is limited but demand is strong in the PADD-5 district that includes British Columbia, fuel from the four other regions is moving around to meet that need — and bringing up prices everywhere.

"You have to compete for those limited barrels," Muralidharan said. "So who pays the higher prices wins the product."