Hurricanes in the U.S. Mean High Gas Prices in Canada

September 19, 2017

By Evan Kelly, Senior Communications Advisor for BBB serving Mainland BC

The price at the pump in Vancouver always seems to raise the blood pressure. Relentless, never seems to go down much at all, and always hovering between 1.30 and 1.50 a litre. Add that to our long commutes and high housing prices...well you get the idea. Enter hurricanes!

It’s been a devastating season for those countries and U.S. states in the paths of Harvey, Irma, and Maria. The hardships the people face there make our pricy troubles seem easy to swallow. However, why do our prices at the pump increase whenever storms hit the Southern U.S. Gulf? Canada produces gas, right? Why shouldn’t it actually be cheaper? Easy questions to ask...a lot tougher to answer.

The simple answer is business shuts down limiting supply. Numerous refineries in the Gulf stopped operating when the hurricanes started rolling in. Even Canadian companies in the energy sector in the U.S. closed their offices while flooding ravaged the region. It’s not just refineries shutting down either. Entire pipelines that service Northern States stand idle.

But the U.S. has a quarter-billion barrels stockpiled...why not just use that? Would be nice, if much of it wasn’t located in hurricane-affected areas. Some of it is also unfinished and need to be blended before making it to market.

Here in Canada, we have 15 refineries, however, only about 35% produce standard gasoline for conventional cars. The rest goes to, among others, diesel, aircraft fuel, and fuel oil. Upping the output to satisfy a lack of gas from the Gulf region might not be an option. Canada, of course, ships a lot of crude to other countries instead of refining it ourselves. Why? Well, we make revenue on it of course, but also refined gasoline has a shelf life so we have limited need to keep producing it and having it ‘go bad.’ It just makes sense to refine just as much as we need (at least in the west) and export the rest (at least from the west). That’s great, it doesn’t explain why Canada imports 700,000 barrels of crude and 60,000 of gas a day from the U.S. to the Atlantic provinces. Infrastructure. Canada lacks the ability to move the product from the west to the east. It’s easier and more cost-effective to import. Suffice to say...if prices go up stateside...they go up here.

One of the other reasons our prices remain high or increase along with American increases is that if we did lower our prices American wholesalers would bring tanker after tanker under Free Trade across the border, load up on our gas and eventually leave us with a shortage.

So what’s the answer? Get an EV...