Questions remain over lack of competition in B.C. gas market
November 13, 2019
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British Columbia Premier John Horgan says he plans to ask Prime Minister Justin Trudeau’s government to review the province’s gas and diesel industry after a report released Tuesday questions the competitiveness of the market.
Horgan called an inquiry in May when gas prices reached a record-breaking $1.70 per litre but neither its final report released in August nor the new supplemental report explain why B.C. drivers pay about 13 cents per litre more than those in similar jurisdictions.
“Clearly there’s something wrong with the gas market in British Columbia and we want to get to the bottom of that. We’ve got some ideas that we’ll be bringing forward in the weeks ahead in the legislature of British Columbia, but I think the federal government has a role to play as well,” he told Canadian Press.
Horgan said the federal government has the ability to look at competition within markets.
A three-member panel chaired by David Morton, CEO of the B.C. Utilities Commission, was asked to explore factors influencing gas and diesel prices, not including taxes, since 2015 and consider actions the province could take.
It found an unexplained difference of 13 cents per litre between Metro Vancouver and Seattle that is costing B.C. drivers nearly $500 million a year.
Wholesale prices in southern B.C. are set based on those in the Pacific Northwest because it is a nearby region and a similar price is considered justifiable, Morton said in August.
However, the inquiry found that even after accounting for transportation costs and higher B.C. fuel standards, Metro Vancouver drivers were still paying more than those in Washington.
The commission said Tuesday it received information from five interveners and 41 letters from the public during a 30-day comment period, following the release of its Aug. 30 report.
There remains no concrete evidence to explain a 10 to 13 cent a litre difference in gas prices between Metro Vancouver and Seattle, the report says.
The interveners presented several factors in an attempt to account for the difference, but the panel found their evidence inconclusive or conflicting, the commission says in a news release.
The new report says B.C.’s fuel prices are often in line with Pacific Northwest spot prices, yet only about five per cent of the gasoline sold in B.C. is imported from that area — a situation the panel described as “the tail wagging the dog.”
Up to early 2015, there was a difference of about five cents per litre between Vancouver wholesale prices and the Pacific Northwest spot prices. By 2019, the gap had widened to about 20 cents per litre, 13 cents of which remains unaccounted for, the report says.
“The unexplained difference in wholesale prices raises the question as to whether there is a well-functioning, competitive gasoline and diesel market within B.C.,” the news release says.
The commission has submitted a copy of the 35-page supplemental report to B.C. Trade Minister Bruce Ralston.
Morton told Canadian Press in August that the province could consider encouraging more refinery capacity, but it would be challenging given that gas and diesel demand is projected to decline. Another option would be to bring in regulations to reduce the price differential.
In the new report, the panel agrees with a submission from Imperial Oil Ltd. that economic regulation may result in unintended consequences and can introduce uncertainty, business risk and additional administrative burden, all of which can discourage infrastructure investment needed to sustain future fuel supplies.
But it says regulators have a responsibility to minimize risks while still providing protection from monopolistic pricing.
Horgan described the price difference as a “gouge on local drivers,” and said the problem isn’t just about supply, adding that there is only one refinery in the province.
“We asked the utilities commission to get us the straight goods on why gas prices were so out of whack in British Columbia compared to other parts of the country,” Horgan said.
“Why are we paying 13 cents a litre more than other parts of the country? Those are questions that still remain unanswered despite not one but two reviews over the past couple of weeks.”