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Petroleum analyst says $2 per litre gas is possible scenario

High fuel prices don’t have anything to do with the Kinder Morgan pipeline dispute – at least not yet
11467867_web1_180419-NTC-GasPricesKTW
Gas prices spiked to $1.36 per litre in Kamloops last week. Even the Esso in this photo, at Hillside Way and Rogers Way in Aberdeen, raised its price by nine cents soon after the photo was taken. This week the price is down about three cents. Kamloops This Week photo

By Sean Brady

Kamloops This Week

Fuel at many Kamloops gas stations jumped to the $1.36 per litre mark last week – and it likely didn’t have anything to do with the ongoing Kinder Morgan pipeline dispute, according to one analyst – at least not yet.

GasBuddy senior analyst Dan McTeague said the recent increase is an indication Kamloops is catching up with the rest of Western Canada, where the price of gas has increased due to the rising price of oil and the Canadian dollar, which McTeague said is not responding to the higher price of oil.

“So, because of that, it’s a double-whammy,” he said.

READ MORE: Ongoing protests behind halting of Trans Mountain (Apr. 10, 2018)

To show how the price of oil affects the price of gasoline, McTeague looked at the price of oil one year ago, when it was around US$51 a barrel, compared with when KTW contacted him recently, when it was around US$65 US a barrel.

He concluded that change in oil price would account for a gasoline price increase of 12 cents per litre.

In the past seven days, the price of crude oil has gone from US$63 a barrel to US$67 a barrel.

Another factor in the price increase consumers are now noticing is the carbon tax increase brought in by the province on April 1, accounting for 1.2 cents per litre of the increase.

Gas prices in Vancouver are currently around the $1.54 per litre mark. Drivers in that area incur an additional 17-cent-per-litre TransLink tax when fuelling up, which explains some of the difference, but McTeague said that’s not the only reason.

“You have to recognize that one of the main reasons why there is such a huge disparity in prices within British Columbia isn’t just taxes. You have to look at the fact they have very little supply, and what little supply they have is being provided by a constrained existing Kinder Morgan pipeline — or coming from the U.S.,” he said.

The political side of things is one McTeague has seen before.

He served as a Liberal MP in Pickering, Ont. from 1997 to 2011, including a stint as chair of a government task force on gasoline pricing in 1998.

The Kinder Morgan Trans Mountain pipeline expansion is an issue of great tension between neighbouring premiers John Horgan and Rachel Notley.

The Alberta premier has threatened to shut off the taps to B.C., restricting the flow of petroleum products.

Kinder Morgan has also ceased all non-essential work on its pipeline expansion project due to the B.C. government’s opposition.

“I’m sure this is not what anyone wants,” McTeague said.

“But if it’s going to be a zero-sum game and the Horgan government is going to play for keeps, it has to expect that the pain will be felt more so in B.C. than any other province. You’ll be without supply of gasoline, to a large extent.”

The picture McTeague painted is one where B.C. is forced to seek emergency supply elsewhere — from other provinces via rail or from neighbouring U.S. states like Washington.

“In that scenario, where there’s the outside chance of bringing in desperately needed supplies, your starting price is $2 per litre,” he said.

If that happens, McTeague said, the economy would come to a “standstill,” noting other measures might come into play, such as tax abatements from the provincial government.

“It’s a game of chicken that I think the Horgan government is playing and it has no idea how serious and how devastating this is going to be for the B.C. economy,” he said.

“They better get a grip real soon.”

As of Monday, gas prices in Kamloops had dropped to $1.32.9/litre at most gas stations, according to gasbuddy.com. Prices in Barriere and Clearwater were at $136.9.



newsroom@clearwatertimes.com

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