# Crude oil prices still low but gas prices in Ontario on the rise



## carverman (Nov 8, 2010)

You would think that with crude oil prices still low (to what they were last year), that Big Oil would give the consumers a break on the price per litre, 
but the gouging is continuing, now that consumers are used to lower crude oil prices, along with a lower Canadian dollar.

So it would seem that the price at the pumps hasn't got much to do with the price per litre..unless of course crude oil prices rise dramatically, then
the price per litre will rise considerably as well. 

Conspiracy by Big Oil? The oil companies are paying less per barrel of oil than they did before..
yet in some places, especially here in Ontario, it's approaching $1.20 a litre for regular.


http://www.ontariogasprices.com/Prices_Nationally.aspx


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## fraser (May 15, 2010)

Ours bumped up but have gone down just a little. Last weekend we paid 99.9 in Edmonton (Costco). Yesterday we paid 103.9 at CoOp in Calgary. The latter is down from about 112.9 ten days ago in Calgary.


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## bgc_fan (Apr 5, 2009)

One factor is the fact that oil is priced in USD, so with the falling CDN dollar, the crude price in CAD$ may actually be the same as it were last year. I don't know if there is a comparison of crude oil in CAD$ out there to confirm that.


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## OnlyMyOpinion (Sep 1, 2013)

"Conspiracy by Big Oil?" 
Yawn


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## doctrine (Sep 30, 2011)

So, who specifically is gouging, and how much money are they making? Other than a generic "Big Oil". Because "Big Oil" is losing a lot of money. The energy index in Canada is down a massive 40% year over year.


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## fraser (May 15, 2010)

Don't know who is making on this. 

Oil wells are operating 20 minutes from where I live and two refineries are within a seventy minute and a 200 minute drive respectively from my home. 

It also seems to me that gas prices go up considerably faster than they go down when compared to the changes in the price of crude. I realize that the CAD value and demand/supply for gas has an impact. Having said that, gas is still too expensive wherever you happen to live in Canada. Filled up stateside a few weeks ago. The difference was very noticeable.


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## doctrine (Sep 30, 2011)

Do you know the difference in taxes on gas between Canada and the US?


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## nathan79 (Feb 21, 2011)

fraser said:


> It also seems to me that gas prices go up considerably faster than they go down when compared to the changes in the price of crude.


I've observed exactly the same thing. Prices can go up overnight due to a spike in crude, but when crude goes down it takes 1-2 weeks for that drop to filter down to gas prices. It's clear that someone's making a lot of money but no one can agree on who.


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## carverman (Nov 8, 2010)

nathan79 said:


> I've observed exactly the same thing. Prices can go up overnight due to a spike in crude, but when *crude goes down it takes 1-2 weeks for that drop to filter down to gas prices*. It's clear that someone's making a lot of money but no one can agree on who.


When that happens, "Big oil" claims that their refineries have processed the crude bought at the higher price into gasoline and it is in the big storage tanks to be distributed, so they are not going to take a loss and sell it at a higher price until that refined product is used up..but the trend is that in some demographic areas, the price of a litre of gas has remained the same or even gone up while the world price seems to be lower and fluctuating at a lower price. 

Theories on what is happening in Ontario?


> “The Canadian dollar is actually going down, and crude oil prices are always quoted in US dollars,” said Steve Bang, a business professor at Humber College.
> “So as our dollar slips against the U.S. dollar, what will happen is that the actual price of gas will go up because of that.”





> Marvin Ryder agrees that oil companies are taking advantage of discounted crude prices to add to their bottom line. *But he estimates the increased profit is only about one cent per litre.*


So then, if not "Big Oil", who or what is actually causing the price of a litre of gas to keep rising in Ontario?
Is it because more summer driving (vacations and to cottage country) increases more demand?
More demand for the products leads to charging higher prices (gouging) based on the laws of supply and demand? 


http://globalnews.ca/news/1892843/why-gas-prices-are-going-up-as-oil-prices-drop/

Other (possible) conspiracy theories? 
http://www.theglobeandmail.com/repo...s-behind-plunging-oil-prices/article22361121/


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## cainvest (May 1, 2013)

Just like pricing for any other supply chain/product, see what the market will tolerate. So if they think they can skim a few cents more per liter at each point going down the line, you can bet they'll do it.


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## sags (May 15, 2010)

Canada is about 2/3rds the way down the list from highest in Norway at 2.02 to the lowest in Venezuela at .02 cents.

I suspect the lower priced countries use the royalties to subsidize the price for consumers, Norway lets people pay the full price and stuffs the royalties into a fund that makes them all millionaires and Canada receives less royalties and spends them on general spending.


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## Mechanic (Oct 29, 2013)

Blatant price fixing by fuel retailers....because they can and because the government doesn't want to open the can of worms.


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## DiazJenkins (Jun 30, 2015)

Retail gas prices fluctuate between regions, experts say, based on several factors including how much regional distributors paid at the wholesale level, the amount of profit margin they think they can collect from gas stations. There are also differing tax rates between provinces, with gasoline taxes generally lower west of Ontario.


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## Rusty O'Toole (Feb 1, 2012)

The Canadian government has an energy policy, and a government owned oil company (the only oil company in the world that loses money) and we are the only oil exporting country in the world with high oil prices.

2 things I have noticed: government price controls can stop prices from going down but can't stop them from going up for long. When a government agency sets out to control an industry, it isn't too many years before the industry controls the government agency.

And, as a bonus, the only monopoly that can last, is one protected by government regulation. High profits always attract new suppliers who find ways to sell a little cheaper. Unless prevented by law.


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## bgc_fan (Apr 5, 2009)

Rusty O'Toole said:


> The Canadian government has an energy policy, and a *government owned oil company* (the only oil company in the world that loses money) and we are the only oil exporting country in the world with high oil prices.


Which company is that? Petro-Can hasn't been a crown corporation for decades.


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## Eclectic12 (Oct 20, 2010)

doctrine said:


> So, who specifically is gouging, and how much money are they making?
> Other than a generic "Big Oil". Because "Big Oil" is losing a lot of money. The energy index in Canada is down a massive 40% year over year.


The index is reflecting investor sentiment ... which may or may not be in line with the profit numbers.




doctrine said:


> Do you know the difference in taxes on gas between Canada and the US?


I didn't find any easy comparisons but I did find these summaries.
http://retail.petro-canada.ca/en/fuelsavings/2139.aspx
http://www.gaspricewatch.com/web_gas_taxes.php


Cheers


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## jaybee (Nov 28, 2014)

Rusty O'Toole said:


> The Canadian government has an energy policy, *and a government owned oil company* (the only oil company in the world that loses money) and we are the only oil exporting country in the world with high oil prices.
> 
> 2 things I have noticed: government price controls can stop prices from going down but can't stop them from going up for long. When a government agency sets out to control an industry, it isn't too many years before the industry controls the government agency.
> 
> And, as a bonus, the only monopoly that can last, is one protected by government regulation. High profits always attract new suppliers who find ways to sell a little cheaper. Unless prevented by law.


Since when?


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## Spidey (May 11, 2009)

I think some of it is due to the drop in the CDN dollar as oil is priced in US. But I've also been perplexed as that still doesn't seem to account for prices being almost where they were when oil was 40% higher. It would be nice to know who is profiting so I could invest in them.


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## zylon (Oct 27, 2010)

Spidey said:


> ... It would be nice to know who is profiting so I could invest in them.


The best I've been able to find in recent times is Valero Energy (VLO-us).
Depending on the time frame chosen, sometimes RDS.B is stronger, sometimes VLO.
In 2008 RDS.B, VLO and crude oil all crashed simultaneously.
Over the past year, VLO has held up quite well.










Disclosure: I own none of the symbols mentioned.

*ADDED:*
"Valero will continue to benefit from lower crude feedstock costs, and from cheap natural gas as an energy source. Increased pipeline capacity from the Mid-Continent region to the Gulf Coast, and the ban on U.S. crude oil exports have boosted the supply of low-cost crude oil feedstock for Gulf Coast refineries. Moreover, crack spreads have improved in the last few months. Hence, better earnings are expected to VLO's refining segment in the second quarter."
Read more here: http://seekingalpha.com/article/331...ing-to-a-winning-ranking-system-valero-energy


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## Eclectic12 (Oct 20, 2010)

jaybee said:


> Rusty O'Toole said:
> 
> 
> > The Canadian government has an energy policy, and a government owned oil company ...
> ...


Petro-Canada, where the NDP wrote up the legislation to create it in 1973, the miniority Liberals supported it and the Stanfield led Conservatives opposed it.

It operated as a crown corporation from the start of operations in 1976 but during Brian Mulroney's reign, it stopped being used as a gov't policy tool and was privatised. The first batch of public shares were sold to the public in 1991, with the Canadian gov't keeping a 19% stake. The Canadian gov't sold the last of it's ownership stake in 2004.


AFAICT ... the statement should be more like the Canadian gov't * used to own* an oil company as they've been out of the business for around eleven years.


At this point ... the PetroCanada brand is really just a name as it is now a subsidiary of Suncor, after the 2009 merger.
https://en.wikipedia.org/wiki/Petro-Canada




Rusty O'Toole said:


> ... we are the only oil exporting country in the world with high oil prices.


I can agree that there are a lot of oil exporting countries with cheap oil prices ... the "only" part is not true.

Canada has company as Norway hits the top ten oil exporting list at number five where they are reported to be paying $7.50 US for a US gallon where the Canadian $3.94 price is cheaper. Note that Norway is listed as exporting slightly more than Canada, which is on the list at number nine. The US that hits the export list at number ten with a $2.99 price listed which compared to the number one exporter's $0.60, seems high too. :biggrin:

http://www.whichcountry.co/which-country-exports-the-most-oil/
http://www.mytravelcost.com/petrol-prices/


Prices has fluctuated but for comparison purposes, I figured the web site would be using the same point in time numbers. 


Another interesting note is that in 2011, Norway is reported as paying $9.28 when the US nation wide average was $3.53, according to this link.
http://money.cnn.com/2011/03/10/news/international/gas_prices_worldwide/index.htm


Cheers


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## sags (May 15, 2010)

An interesting story on Norway's oil sector and tax regime.

http://www.cbc.ca/news/business/norway-s-sovereign-wealth-holds-lessons-for-canada-1.3002803


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## Zoodles95 (Jul 10, 2015)

Seems crazy that crude is tanking (sorry for the pun) and yet despite this we are getting little to no gain at the pump due to the value of the Canadian dollar.


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## Cal (Jun 17, 2009)

Yeah, like a double whammy with our dollar sinking.


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## Zoodles95 (Jul 10, 2015)

Cal said:


> Yeah, like a double whammy with our dollar sinking.


Yup... Canadian consumers do not get the benefit of lower gas prices and people are going unemployed in Alberta and our National economy is sliding into recesssion.


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## james4beach (Nov 15, 2012)

The weak CAD is hurting us (it means energy costs are higher). But in the big picture, I don't see anything to complain about. Gasoline is cheaper than in past years: http://www.gasbuddy.com/Charts

Look at the gasbuddy charts (for Canada, in CAD currency). Sure, in 6 months, the price at the pump is up +30%

But in the last year, gas is down -10%
Over 2 years, it's down -10%
Over 3 years, down -4%

How many things do you know that are *cheaper* now than 3 years ago? Gas at the pump is.

By the way, gasoline is a different energy contract than crude oil. NYMEX gasoline is up +50% in the last six months so of course gasoline should have gone up in the last six months. But look at those longer term pictures; the charts are all available on gasbuddy.


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## CPA Candidate (Dec 15, 2013)

Article in the G&M yesterday talked about refiners enjoying high margins in comparison to prior years.

http://www.theglobeandmail.com/repo...ices-in-canada-amid-oil-drop/article25597019/

“Rising wholesale gasoline prices outpaced rising crude prices this past quarter, leading to increased refining margins that settled at an eight year high of 27.7 cents per litre in June,” the Kent Group said in a recent report. “Growth in refining margins was particularly pronounced in Eastern refineries, as the increase in their crude input costs was not as substantial as those in western Canada.”


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## CPA Candidate (Dec 15, 2013)

james4beach said:


> How many things do you know that are *cheaper* now than 3 years ago?


Gold.


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## james4beach (Nov 15, 2012)

Right, a lot of commodities are cheaper. Including gasoline.


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## james4beach (Nov 15, 2012)

For anyone certain that we're getting screwed on gasoline prices, wouldn't a simple paired-trade "solve" this?

You could simultaneously go long gasoline contracts (or UGA) and short crude oil. If there's consistent outperformance of gasoline vs crude, isn't that a simple trade to make?

P.S. I think this is not a great idea to do using ETFs but the institutions could make this trade using futures.


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## fraser (May 15, 2010)

Spoke to someone knowledgeable in the business today. He says the betting in Calgary HQ's is that oil will remain sub $50 and possible go to $40. when the Iranian supply comes on line. Dollar is helping Canadian firms but he says most firms are revisiting capital expenditure budgets, operating costs, and 'employee rightsizing' actions. More layoffs coming prior to Q3. Not pretty.


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## CPA Candidate (Dec 15, 2013)

Gas prices in Winnipeg have recently spiked to similar highs seen last summer, while oil is half as much. The average price one year ago was 1.27 for regular and currently it is 1.19, a decrease of only 6%.

The much anticipated rise in consumer spending related to saving on gasoline is looking more naive by the day. The savings for my household might come out to $200 for the year, a immaterial amount compared to the total budget.

In my specific line of work as an accountant for a manufacturing company with integrated distribution, fuel is a material cost and we have experienced substantial savings on that line item. We have not passed a penny of that on to customers. It is no different for the refiners. Add in high Canadian taxes and the dollar depreciation and the Canadian consumer once again finds no where to hide.


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## carverman (Nov 8, 2010)

CPA Candidate said:


> In my specific line of work as an accountant for a manufacturing company with integrated distribution, fuel is a material cost and we have experienced substantial savings on that line item. We have not passed a penny of that on to customers. It is no different for the refiners. Add in high Canadian taxes and the dollar depreciation and the Canadian consumer once again finds no where to hide.


I think a lot of the inherent cost of producing and distribution of that litre of gasoline is due to production costs, wages, delivery costs, contracted costs, other costs such as exchange on the dollar, profits and federal excise, GST and provincial taxes..if applicable. 
The world price of rare crude oil is a fractional component of that cost. 

Even if the price of a barrel of oil drops below $40, everyone including the refineries, distribution chains and gov'ts will still want to make a profit to stay in business,
so although some savings may be passed on the consumer, supply and demand also has an effect.
In summer driving/vacation months and long weekends, expect to pay more.


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## gibor365 (Apr 1, 2011)

> Even if the price of a barrel of oil drops below $40, everyone including the refineries, distribution chains and gov'ts will still want to make a profit to stay in business,
> so although some savings may be passed on the consumer, supply and demand also has an effect.


Just checked http://tomorrowsgaspricetoday.com/gas-prices/?city=101
Exactly 1 year ago: oil was 102.7 and gas 130.9 , today oil is 45.4 and gas 101.9 , thus price of oil dropped 56% and price of gas just 22%!


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## OhGreatGuru (May 24, 2009)

gibor said:


> Just checked http://tomorrowsgaspricetoday.com/gas-prices/?city=101
> Exactly 1 year ago: oil was 102.7 and gas 130.9 , today oil is 45.4 and gas 101.9 , thus price of oil dropped 56% and price of gas just 22%!


Please explain why you think the percentage difference should be the same.


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## doctrine (Sep 30, 2011)

Someone should regulate the price gas to the price in Venezuela, under 1 cent a liter. That should work. Or how about 10 cents. The oil companies should thank us it is only 10 cents and not 1 cent. They can cover the 40 cents a liter in municipal, provincial and federal taxes out of their windfall profits.


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## gibor365 (Apr 1, 2011)

OhGreatGuru said:


> Please explain why you think the percentage difference should be the same.


I don't tell that % difference should be the same, but it shouldn't so big difference


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## MrMatt (Dec 21, 2011)

gibor said:


> I don't tell that % difference should be the same, but it shouldn't so big difference


Based on what logic?
Some taxes are per Liter, the cost to refine is per liter, the cost to transfer is per liter.

Look at the cost of a loaf of bread vs a bag of flour, care to explain that difference?


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## andrewf (Mar 1, 2010)

The Canadian dollar has fallen by about 15%in the last year as well, which explains part of the difference. Oil has only fallen by about 45% in Canadian dollar terms.


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## gibor365 (Apr 1, 2011)

andrewf said:


> The Canadian dollar has fallen by about 15%in the last year as well, which explains part of the difference. Oil has only fallen by about 45% in Canadian dollar terms.


make sense


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## OhGreatGuru (May 24, 2009)

gibor said:


> I don't tell that % difference should be the same, but it shouldn't so big difference


By your reasoning, if the price of iron ore drops 40%, the retail price of stainless steel cutlery should also drop 40% or somewhere near it. I can't argue with this kind of logic. I think I am wasting my breath (or key strokes) but you might want to read Petrocanada's web page on what all goes into the retail price of gasoline. http://retail.petro-canada.ca/en/fuelsavings/2132.aspx


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## HaroldCrump (Jun 10, 2009)

Taxes make up about a 3rd of the retail price of gasoline.
With fall in the pre-tax price of gasoline (albeit not as much as in the US because of forex effect), govt revenues from gasoline are going down.
They need a way to increase their revenue...enter, the carbon tax (in Ontario).
It will offset any savings that consumers have been receiving in the last year or so, and take the price of gas back into the $1.20-ish range.


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