Fuel Prices Continue to Rise to Record Levels

By: Jag Dhatt

If there was one positive, that word being subjective, from Covid-19 is that gas, and diesel, prices began to fall. It was something that the citizens of Canada hadn’t seen for a long time. In fact, Vancouver, which retains the title as the most expensive city for gas in North America, saw prices fall to an average low of $0.99 for a few months. Those prices hadn’t been seen for over a decade.

Fast forward to March 2022 and the low fuel prices are at record highs. Yesterday, the price of regular unleaded gasoline was at $2.09 per liter and for diesel, it was $2.12 per liter. Yes, you read that correctly and it even has politicians wondering what can be done.

According to Shell Canada, the price of fuel is affected by many factors, but the main ones include:

  • Crude oil costs (40-55% of price) – this is the raw materials for making gasoline and diesel
  • Taxes (25-35% of price) – includes federal, provincial and municipal, and of course, GST
  • Refiner’s margin (10-25% of price) – in simple terms, the profit
  • Marketing (4-6% of price) – to advertise the products the suppliers and retailers are selling

Of course, world events, especially turmoil, can influence fuel pricing. With the recent invasion of Ukraine by Russia, there has been a spike of fuel costs? Why?

For one, Russia produces about 10 to 12% of the world’s crude demands and since the war began, Russia’s export has decreased by 1.5 million barrels. Thus, even though demand has stayed the same, the supply has suffered. Canada buys no crude oil from Russia, but global supply means countries are struggling to find new suppliers, which thus drives up the price of oil. And this pinch has been felt all over the world.

Another related reason is that some of the global energy giants, like Shell, stopped purchasing Russian oil and natural gas; again, in order to find new supplies, their own costs increase, which gets passed on to the end consumers.

What’s important to note, and a crucial factor indeed, is that regionalism is vital in what you pay at the pump. On average, BC residents pay a premium, as compared to the rest of the country, and for that, there are a couple of major reasons.

If you live in a region that is further from the source of supply, your end price will be higher due to transportation costs. Pipeline disruptions or damage can also be a factor here, as can be storage and distribution costs.

But what really hurts BC is provincial and regional taxes, and on average, residents of this province pay about $0.73 per liter just in gas taxes, again, the highest in the country. Ask anyone at the pump and they’ll say it’s robbery.

Although fuel prices will stabilize in the coming months, most experts predict it will take many months vs weeks. And that doesn’t sit well with most consumers, especially since wages don’t increase as quickly as fuel prices at the pump.

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