Alberta’s faulty pipeline gambit

The Alberta government says that if only B.C. would allow a second pipeline to be built, our gasoline prices would go down.

If only it were true.

The new pipeline will not supply more gasoline to B.C. and it will not reduce our gasoline prices. The reason is hardly a surprise -the new pipeline will carry crude oil, not gasoline.  A report uncovered by reporter Justine Hunter confirms that.

The report was commissioned by Trans Mountain with the hope that it would demonstrate the need for a new pipeline. To no one’s surprise, that’s what they found.  The consulting firm Muse, Stancil & Co. says:

“The startup of [the Trans Mountain expansion] project will act to increase the price of crude oil at Edmonton because roughly 79,500 [cubic metres a day] of crude oil is diverted from the existing North American markets to Northeast Asia (Globe and Mail, May 6, 2019).”

In other words, what B.C. needs is not what the pipeline will deliver. It will send crude oil to overseas markets. It will not send crude oil to be refined into gasoline in B.C.

Even if the second pipeline delivered crude to be refined into gasoline, that wouldn’t happen because our refineries are running full-tilt. They couldn’t produce any more gas even if they wanted to.

For sure, B.C. would be hurt if Alberta were to cut off the existing pipeline. Alberta supplies 80 percent of fuel burned in B.C.

Dan McTeague, senior petroleum analyst for gasbuddy.com, says the only way gas prices could go down if the existing pipeline carried more fuel:

“The new pipeline would be entirely devoted to heavy oil, but the existing pipeline would be expanded by 50,000 barrels per day.”

More supply would reduce prices in a marketplace that was properly functioning.  However, there is some doubt about the marketplace according to the Canadian Centre for Policy Alternatives. They claim that price-gouging is driving up prices. Their report reveals that of the 55 cent per litre increase since 2016, only 6.3 cents is a result of increased taxes while profit margins have increased by 18 cents.

Another group confirms that finding. Navius Research reports that since 2008, refinery margins in Metro Vancouver increased to 35 per cent while the increase was less than 18 per cent in the rest of the country. They say that margins “have decoupled from supply costs, resulting in prices that cannot be attributed to competitive market forces or scarcity of supply.”

While there is no hard evidence of price-fixing by the four companies that supply the Lower Mainland, Premier Horgan has asked the B.C. Utilities Commission to investigate the record-breaking gas prices. It will be interesting to hear what they find.

The BC Liberals see political hay to be made. They have erected huge billboards with a picture of Premier Horgan and the words, “Blame John Horgan.” BC Liberal leader Wilkinson says that Horgan has failed to cap gas taxes.

I have to smile at Wilkinson’s claim, not just because taxes aren’t the problem but because it was the BC Liberals who introduced the carbon tax in the first place.

 

 

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