The Alberta carbon tax on gasoline increased on 1 Jan. 2018 to 6.73 cents/L, BC to 7.78 cents/L

Gasoline prices in Canada have been increasing from this decade’s low of 90.2 cents per litre (cents/L) on average in Feb. 2016. In April 2018, gasoline prices across Canada averaged 134.7 cents/L, which is 16.6 cents/L higher than this time last year, according to the National Energy Board.

Source: National Energy Board.

The price paid at the pump for gasoline consists of the crude price, refining margin, marketing margin, taxes.

The refining margin is the difference between the price of crude oil and the wholesale price at which the refiner sells gasoline and diesel.

The marketing margin is the difference between the wholesale and retail prices of gasoline, before taxes are added.

The retail price with tax includes the crude price, refining margin, marketing margin and applicable taxes.

Many factors cause higher fuel prices:

  • Oil prices are increasingCanadian refineries process mostly light crude oil and therefore Canadian gas prices are influenced by international light crude oil prices. Brent crude prices averaged US$72.11/barrel in April 2018, up 37.9% from US$52.31/barrel a year earlier based on Brent spot price FOB.
  • The switch from winter blend gasoline to summer blend in April changes the composition of gasoline at the pump. Winter gasoline is blended with lower cost (and lower energy) butanes to increase the vapour pressure of gasoline so vehicles can start in colder temperatures. Refiners generally switch to summer gasoline by April 15 and generally switch back to winter gasoline blends around Sept. 15.
  • Demand for gasoline increases with the summer driving season. The start of the summer driving season in Canada begins during May long weekend, and is the main contributor to a pump price that is 6.87 cents/L higher on average from April to Sept., than from Oct. to March. The average is calculated from 2013 to May 22, 2018.
  • Refining margins, another component of pump prices, are on the rise across Canada. As of April 2018 refining margins reflected at the gasoline pump increased 14% above the 5 year average, reaching 28.1 cents/L. The average is calculated from 2013 to 2017. Refinery margins adjust depending on supply and demand for refined products in each market.
  • Fuel and carbon taxes have increased in recent years for some jurisdictionsThe provinces of B.C., Alberta, Ontario, and Quebec have carbon taxes that apply to gasoline. The B.C. Carbon tax on fuel increased on 1 April 2018 to reach 7.78 cents/L for gasoline. The Alberta carbon tax on gasoline increased on 1 Jan. 2018 to 6.73 cents/L. Both Ontario and Quebec have a cap and trade program which applies to retail fuel prices, including gasoline.
  • Regional issues and transportation disruptions can have local or regional effects on prices. For example, gasoline prices in Vancouver, which are the highest in North America, have increased to a high of 160.6 cents/L in May 22, 2018. This is due in part to the recently completed shutdown at the Burnaby refinery which supplies about 30% of the British Columbia (B.C.) area’s fuel. Additionally, Vancouver is one of the three municipalities in Canada, along with Montreal and Victoria, to apply transportation taxes in addition to federal and provincial taxes on transportation fuels.