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The Vancouver Sun: How about those gas prices, eh?

19 January 207
Page 9

If there’s a link to climate change, we seem to have found it

The weather has no equal when it comes to topics of conversation. Golfing in Ontario in January, snowdrifts in Vancouver, bears not hibernating, birds not migrating and melting chunks of Canada’s Far North drifting off into the Arctic Ocean have been dominating public discourse.

Running a distant second is the price of gasoline, which only takes over from weather when passionate debate over climate change veers into a soporific discussion about carbon emissions credits trading.

As anyone who has studied the gasoline market can attest, humankind likely has a better chance of influencing the temperature of the planet than changing the price of a litre of regular unleaded at the pump.

Why the price of gas seems impervious to fundamental economic forces has befuddled royal commissions, standing committees, think-tanks and others looking for a cause and culprit.

In every serious study, big oil has been absolved of blame. Oil companies don’t reap huge profits selling gas, they make most of their money pumping crude.

It’s not the fault of the Organization of the Petroleum Exporting Countries, which has largely lost its power to establish a world price for oil.

Nor is it fidgety commodities traders who are responsible not only for raising but also lowering the value of oil futures contracts depending on the mood of their clients.

Governments are certainly part of the pricing equation, but taxes of 36.4 cents on a litre of fuel selling at $1.02 in Vancouver are far less than in Europe where they can be double or triple the base cost of the product. The service station franchisee makes a meagre nickel on the sale of a litre of fuel, and that’s been the case for at least five years.

So why was the price of a litre of gas $1.02 at the Petro-Canada station at Southwest Marine and Cambie on Wednesday this week and just 84.9 cents at the Petro-Canada station at Yonge and Chatsworth in central Toronto?

As Vancouver Sun reporter Scott Simpson explained last Saturday, the wholesale price of gas in Vancouver is linked not to other Canadian cities, but to centres on the U.S. West Coast. According to gasbuddy.com, a U.S. gallon of gas was selling in Seattle this week at about $2.85 US while the average in Boston was $2.45 (and it could be had for as little as $2.09 if you knew where to go.)

One explanation for the disparity is that the West Coast has experienced tighter gasoline supplies and limited access to product compared with other regions. Another is that too large a spread between Seattle and Vancouver would compel shipping companies to send all their trucks to one place or the other.

A glance at Toronto’s list of gas prices suggests another reason: competition from independent retailers. Consumers in the Toronto region can buy gas at Sunys, TruValue, Speedy Gas, Bulls, Neon, Beaver, Petro Plus, Petro 3000, Horizon, Sunset and Elite. These independents do not always offer the lowest price, but they force the majors to be more responsive to keep their customers. On Thursday morning, a Canadian Tire service centre in north Toronto was selling a litre of regular unleaded for 68.5 cents, or nearly 30 cents below the lowest price to be found in the Lower Mainland.

Despite marketing that suggests otherwise, all gas is pretty much the same. Consumers are driven by price.

There was a time when investing in the shares of oil companies was an effective way to offset the rising cost of fuel. But with world oil prices tumbling towards $50 a barrel, closing in on a two-year low, oil stocks have been a losing proposition.

The share prices of Imperial Oil, Shell Canada and Petro-Canada are all lower than they were a year ago, others are flat, and investors are finding better returns elsewhere. Of course, you could hedge your gasoline consumption in the futures market, but commodities trading is not for the faint-hearted nor practical for most consumers.

But British Columbians have found an ingenious way to beat the high price of gasoline. They’re driving less. In 2005, according to Statistics Canada, people in B.C. travelled five billion fewer kilometres by car than they did in 2004. That translates into a saving of more than 300 million litres of fuel — and that calculation is based on everyone driving a Honda Civic hybrid.

The B.C. experience bucks the national trend, which showed people travelling by car more than in previous years. B.C. Automobile Association president Bill Bullis said last summer that he couldn’t think of anything that would explain the decline in travel by car in B.C. other than the price at the pump.

Burning a litre of gasoline is said to produce 2.8 kilograms of greenhouse gas emissions. So British Columbians cut the volume of emissions they produced by more than 840,000 tonnes while saving $276 million (based on an average 2005 price of 92 cents a litre) by not consuming gasoline.

Which brings us back to the weather. If we buy into the theory that greenhouse gases produced by human activity are responsible for climate change, then high gasoline prices are a significant part of the solution to the problem.

Armed with this knowledge, a fill-up for those who insist on driving won’t be any less painful, but there is comfort in believing that it’s for a good cause.

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