Market Snapshot: Canadian gasoline prices rise to highest level in over 3 years

Release date: 2018-05-30

Gasoline prices in Canada have been increasing from this decade’s low of 90.2 cents per litre (cents/L) on average in February 2016. In April 2018, gasoline prices across Canada averaged 134.7 cents/L, which is 16.6 cents/L higher than this time last year.

The price paid at the pump for gasoline consists of the following components:

  • Crude Price
  • Refining Margin
  • Marketing Margin
  • Taxes

The refining margin is the difference between the price of crude oil and the wholesale price at which the refiner sells gasoline and diesel.

The marketing margin is the difference between the wholesale and retail prices of gasoline, before taxes are added.

The retail price with tax includes the crude price, refining margin, marketing margin and applicable taxes.

Source and Description

Source: Kent Group Ltd.

Description: A line chart compares the weekly retail price of gasoline in select Canadian cities and the Canadian average. Components making up this price are charted, specifically taxes, marketing margin, refining margin and crude price. These components are added together to get the retail price with taxes. From 2013 to May, 22 2018 the lowest average price was recorded during the week of February 16, 2016. Since then, prices in every selected market have been trending upward. As of May, 22 2018 the weekly average retail pump prices in select markets reached the following levels, ordered from highest retail price including tax. Vancouver: 160.6 cents/L, Victoria: 155.6 cents/L , Whitehorse: 144.9 cents/L, Montréal: 141.8 cents/L, Canada (Average): 140.1 cents/L, Ottawa: 138.8 cents/L, Toronto: 138.6 cents/L, St. John’s: 137.2 cents/L, Yellowknife: 136.7 cents/L, Calgary: 132.6 cents/L, Charlottetown: 132.3 cents/L, Halifax: 131.0 cents/L, Edmonton: 130.5 cents/L, Fredericton: 129.6 cents/L, Winnipeg: 125.9 cents/L, Regina: 125.7 cents/L, and Saskatoon: 124.6 cents/L.

Many factors cause higher fuel prices:

  • Oil prices are increasing. Canadian refineries process mostly light crude oil and therefore Canadian gas prices are influenced by international light crude oil prices. Brent crude prices averaged US$72.11/barrel in April 2018, up 37.9 % from US$52.31/barrel a year earlierFootnote 1.
  • The switch from winter blend gasoline to summer blend in April changes the composition of gasoline at the pump. Winter gasoline is blended with lower cost (and lower energy) butanes to increase the vapour pressure of gasoline so vehicles can start in colder temperatures. Refiners generally switch to summer gasoline by April 15 and generally switch back to winter gasoline blends around September 15.
  • Demand for gasoline increases with the summer driving season. The start of the summer driving season in Canada begins during May long weekend, and is the main contributor to a pump price that is 6.87 cents/L higher on average from April to September, than from October to MarchFootnote 2.
  • Refining margins, another component of pump prices, are on the rise across Canada. As of April 2018 refining margins reflected at the gasoline pump increased 14% above the 5 year average, reaching 28.1 cents/L.Footnote 3 Refinery margins adjust depending on supply and demand for refined products in each market.
  • Fuel and carbon taxes have increased in recent years for some jurisdictionsFootnote 4.
  • Regional issues and transportation disruptions can have local or regional effects on prices. For example, gasoline prices in Vancouver, which are the highest in North America, have increased to a high of 160.6 cents/L in May 22, 2018. This is due in part to the recently completed shutdown at the Burnaby refinery which supplies about 30% of the British Columbia (B.C.) area’s fuel. Additionally, Vancouver is one of the three municipalities in Canada, along with Montreal and Victoria, to apply transportation taxes in addition to federal and provincial taxes on transportation fuels.
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