Gas pricing-inquiry report ordered by B.C. gov't to be delivered Friday
Credit to Author: Gordon Hoekstra| Date: Fri, 30 Aug 2019 00:14:56 +0000
The B.C. public may get some answers Friday on what influences gasoline prices, particularly in the Lower Mainland — among the highest in North America — but may not get hoped-for relief at the pumps.
On the deadline ordered by Premier John Horgan’s NDP government, the B.C. Utilities Commission will deliver the findings of a gas-pricing inquiry Friday morning.
But two industry observers said the public shouldn’t to get its expectations up that it will lead to reduced gas prices.
“The government’s options are severely limited,” said Werner Antweiler, a professor at the Sauder School of Business at the University of B.C.
Horgan ordered the gas-price inquiry in May when prices at the pump reached $1.70 in the Lower Mainland, saying the public deserved answers about why prices are so much more expensive and variable than in other jurisdictions. At the time, the B.C. Liberals and Alberta government bought ads blaming Horgan and linking his government’s resistance to the Trans Mountain pipeline expansion and taxes to the surging costs.
The commission’s marching orders were to explore factors that may be influencing gas and diesel prices in B.C. since 2015, including refining and retail margins, as well as factors that contribute to retail and wholesale price fluctuations such as access to refineries, amount of fuel in storage, and refinery and pipeline capacity.
The commission was to explore mechanisms the province could use to moderate price-fluctuation increases.
Antweiler said the province could intervene on the tax side, but is severely limited as much of the taxes it controls are targeted to transit and roads, he said.
The other option is to bring in price controls, but that is “economic nonsense,” said Antweiler, as curtailing price will interfere with the competitive market, likely reduce supply, resulting in motorists potentially waiting in lines to get fuel.
Antweiler noted that one of the challenges is that B.C. remains a peripheral market in North America, with only two local fuel sources, refineries in Burnaby and Prince George. It relies heavily on Alberta for refined fuel products that can be constrained by refinery outages and space on the Trans Mountain pipeline. Both mean higher costs for transportation, via truck or rail from Alberta, or farther afield in markets in the U.S., he said.
Antweiler said the commission heard interesting information on what was driving prices, including that in the Lower Mainland higher retail margins were largely accounted for by the high cost of land. On the wholesale side, factors such as increased costs related to B.C.’s low-carbon fuel standards were cited by industry.
Petroleum analyst Dan McTeague said he doesn’t believe the commission’s work will lead to any relief from higher gas prices in B.C. He also noted that B.C. is subject to unique costs, including regulations that don’t exist elsewhere.
If you want a low-carbon fuel standard, you have to change production, make physical changes. “If you want boutique gasoline, you are going to have to pay (for it),” said McTeague.
Not everyone agreed in testimony provided to the commission.
Mark Eliesen, a former B.C. Hydro president, and Robyn Allan, a former ICBC president, both under the NDP, put the blame for high prices in B.C. on a lack of competition. They also said a lack of accountability and transparency has opened the door to misinformation and obfuscation of the business and market factors involved.
“The oil companies are gouging us,” Allan told Postmedia News earlier this year. “There is no market reason that explains the price of gas in B.C.”
Critics, including the Canadian Taxpayers Federation, have said the commission report is pointless because it was barred from investigating government activity that affects prices, including taxes.