B.C.’s requirement to continue reducing the “carbon intensity” of its gasoline and diesel until 2020 is unique in Canada, and fuel suppliers argue this is one reason why prices are higher than surrounding jurisdictions.
B.C. matched the federal low-carbon fuel standard of a five per cent reduction in carbon intensity in 2010, and went further, requiring a 10 per cent reduction by 2020. Similar regulations are in place in California and Oregon, but not in other Canadian provinces.
The reduction is typically achieved by blending plant-based ethanol with gasoline or vegetable-based fuels with diesel, which can cost more and requires additional storage and blending.
The B.C. Utilities Commission delivered its report on high fuel prices last week, as directed by the B.C. government in May after gasoline and diesel prices hit record levels. Premier John Horgan suggested profit taking by oil companies was the main reason, and directed that taxes and other government policies such as the low-carbon fuel standard should not be considered.
— Tom Fletcher (@tomfletcherbc) September 3, 2019
Companies testified about the effect of government policies anyway, and some argued that biofuel costs are a factor.
In a 2015 letter to producers, then-energy minister Bill Bennett said lowering the carbon intensity of fuels further “is achievable through the use of emerging fuels; for example, gasoline made from natural gas, lower carbon diesel produced through advanced bitumen refining, and renewable diesel made from vegetable oils or tallow.”
BCUC chair David Morton said that taxes aside, there is an “unexplained” 13-cent increase in southwestern B.C. gasoline prices compared with the U.S. Pacific Northwest, where the spot wholesale price for urban B.C. is set.
In northern B.C. there is a six per cent jump in price compared to Edmonton where that region’s wholesale spot price is set, taking into account refinery disruptions, crude prices and other industry factors.
“Prices in the Metro Vancouver region are higher by an unexplained 13 cents a litre, and they’re higher than would be expected under more competitive conditions,” Morton said as he released the report. “There is no evidence to suggest collusion among the retail operators exists, nor is there evidence of cartel behaviour.”
The price gap for B.C. calculates out to $490 million a year in extra sales revenue for suppliers, which Jobs, Trade and Technology Minister Bruce Ralston claimed shows B.C. residents are being “ripped off” due to a lack of wholesale competition.
“Our government is concerned with the allocation of refined gasoline flowing into B.C. as well as the lack of transparency around how the price of gas is set,” Ralston said.
In B.C., provincial tax on a litre of gasoline currently amounts to 34.39 cents per litre for Metro Vancouver, including 17 cents to fund TransLink operations. Victoria region transit tax adds 5.5 cents, and across the province carbon tax currently adds 8.89 cents. Another 6.75 cents applies across B.C. to fund the B.C. Transportation Finance Authority, a Crown corporation that owns all provincial highways and land held for future infrastructure.