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Here's why gas prices aren't going up in B.C., despite rationing

On Nov. 26, crude oil prices dropped more than 10 per cent, representing some of the biggest falls since April 2020.

B.C. motorists seeing signs that display 0.00 to signal when a gasoline station has run out for the day might be wondering why prices have been so stable in this time of tight fuel supply.

B.C. motorists seeing signs that display 0.00 to signal when a gasoline station has run out for the day might be wondering why prices have been so stable in this time of tight fuel supply.

The province’s gas rationing order to ensure enough fuel remains for essential vehicles has been extended from Dec. 1 until Dec. 14. Drivers of non-essential cars will continue to be restricted to filling 30 litres of gas at stations across the Lower Mainland, Vancouver Island, Sunshine Coast and Gulf Islands.

The province hopes this will allow more time for the Trans Mountain pipeline to become operational. The pipeline normally supplies more than 85 per cent of the fuel, and crude to produce fuel, to these areas.

On Wednesday, Trans Mountain said in a news release that “provided there are no additional setbacks from the latest round of rainstorms” and “based on the amount of progress we have been able to make, we are only a few days away from restarting the pipeline at a reduced capacity.”

Gas is being barged in from the U.S. and some rail lines have been restored and are bringing fuel to the Vancouver area, but they can only make up so much of the supply.

In the meantime, there are two reasons why gas prices haven’t increased much, according to Kent Fellows, a professor at the University of Calgary’s School of Public Policy.

“The B.C. government has restricted the ability of wholesalers and retailers to increase prices,” he said, pointing to a ministerial order.

Specifically, it says that wholesalers and retailers can’t sell fuel that increases their gross profit margin more than the gross profit margin achieved for that type of fuel during the 90-day period immediately preceding the date of the order, which was Nov. 19.

The average weekly retail price for regular gasoline in Vancouver went from 162.6 cents per litre in the week of Nov. 16 to 160.4 cents per litre the following week, when the rationing order was implemented, to 158 cents per litre this week.

Fellows notes that the order restricts the gross markup, but not prices themselves. It means retailers are allowed to pass changes in wholesale prices to consumers, but it’s not clear what costs wholesalers are allowed to pass onto retailers.

“It’s hard to know right now who will end up absorbing the higher shipping costs, but I would expect it to be a combination of wholesalers and consumers.”

The other factor is that late last week the price of crude oil tumbled due to concerns about the new Omicron COVID-19 variant. On Nov. 26, crude oil prices dropped more than 10 per cent, representing some of the biggest falls since April 2020. But by the following Monday this week, they rallied and made up about half of that loss.

“The issue for coastal B.C. remains that the cost of getting gasoline from the refineries to the wholesale distributors is much higher than it was before the floods since they can’t use the low-cost Trans Mountain pipeline and are limited in their ability to import by rail,” Fellows said.

For consumers at the pump, the tighter supply might not mean higher prices compared with the period before the rationing order. But it could mean that prices don’t fall as much as they normally would or should given the reduction in crude oil prices, according to Fellows.