If you were planning to visit your mother on Sunday, I hope she doesn’t live too far away.
Gasoline prices in metro Vancouver rose again over the Mother’s Day weekend to unprecedented levels, reaching around $2.23 a liter at some stations.
These increases come just a day after record highs of around $2.17 were set on Friday.
And there is no price reduction in sight, warned energy expert Werner Antweiler, an associate professor at UBC’s Sauder School of Business.
Antweiler said there is a complex set of pressures on gas prices around the world, including the war in Ukraine and sanctions on Russian oil, which typically accounts for more than 10% of global supply.
These supply tensions come as the price of crude is already high, reaching $110 a barrel in recent weeks.
But Antweiler blamed some uniquely local factors for making Metro Vancouver’s pump prices among the highest on the planet.
On the one hand, the Canadian dollar is generally considered a reliable petrocurrency on the world market, providing a hedge against rising oil prices. But the war drove most investors to the US dollar as a safe haven, not the lunatic.
And the local offer is also limited. The Lower Mainland gets most of its gas from Alberta refineries through the Trans Mountain pipeline. But that pipeline is seeing “a lot of excess demand,” Antweiler said.
“It’s just not keeping up because it’s fully utilized and it’s also sending oil overseas.”
So the refinery’s margin—that is, the amount above the wholesale price charged by the facility that processes and transports the oil—is typically around 40 to 42 cents in metro Vancouver. Recently, with supply pressures, this has been hovering around 60 to 62 cents, Antweiler said.
That margin increase caused by the supply crisis goes directly to the price you see at the pump. And with Trans Mountain fully booked, some of the local supply has to come from more expensive sources, particularly the US.
Should demand be falling? Oh no
But surely the rising cost of gasoline has caused people to reduce their driving, thus easing demand? Not really, said Antweiler.
He said demand is “elastic,” with enough subway tributaries to see no big problem filling their tanks for $150 instead of $100.
“They complain, but they’re still driving,” he said.
Also, many others who may struggle hard with the high prices have to work somehow, and transit is simply not an option for many. “Some are very price sensitive, others not at all.”
The amount of vehicular traffic has recovered during the recovery from the pandemic and with the summer season ahead. These demand pressures are likely to go nowhere, regardless of cost.
But the good news is that Trans Mountain will eventually expand, right? Again, not so much, according to Antweiler.
With the population of the Lower Mainland continuing to increase and the relatively slow uptake of electric vehicles outside of major cities, he expects “only mild relief” when it’s complete — and it’s still a few years away.
His verdict: Gas prices will remain high for the foreseeable future.
And you thought you could spend that government gas rebate on a Mother’s Day gift, huh?