A number of residents and politicians have expressed their concern with the rising cost of gasoline, as prices at the pumps in Bonnyville exceeded $1.30 per litre for the first time since 2008 earlier this month.
The spike in price by almost 20 cents per litre has been attributed by some to an unexpected shutdown at Suncor's oil refinery in Edmonton in May.
“We know that the price of crude oil has been flat recently and continues to decline, but with the refinery in Edmonton shutting down, people will and have experienced a spike in the price in that region because there is a bit of a shortage in refined products,” explained Jason Parent, a Senior Associate with MJ Ervin and Associates and an expert on the petroleum market.
According to Parent, the price of gasoline is broken down into several components that can change on a day-to-day basis.
“The price of gas is predominantly determined by a couple of important factors, firstly and most importantly, the cost of crude oil,” Parent explained. “The cost that a refiner pays for crude oil makes up roughly half of the price of a litre of oil. Then those refiners will refine crude into several products and turn around and sell those products on the whole sale market.
“The difference between what refiners pay for crude oil and what they sell the refined product for on the wholesale market is called the refiners margin. This is typically anywhere between 10 and 25 cents a litre, depending on the region and few other small factors.”
From there, Parent said the wholesalers distribute large quantities of petroleum to individual gas companies and gas stations, who he said on average up the price from anywhere between five and seven cents per litre. The rest of the cost is made up by both federal and provincial tax levies that Parent said could differentiate from 20 cents to 40 cents per litre, depending on the region.
Tax rates on gasoline in Alberta are amongst the lowest in the country, which local farmer Gordon Graves says sparks the question: why are gas prices in Alberta as high as they are today?
“I think these gas companies gauge us because they can and the government allows them to do it,” Graves said. “There's a definite manipulation of the system – gas prices are still as high as they ever were even after the cost of a barrel of oil has dropped.”
As a farmer in the Bonnyville area, Graves said he notices the added pressure that comes along with rising gas prices more than most, saying it could soon have a negative effect on his farming business.
“When I'm busy during the day haying, spring feeding or combining, I probably spend between $450 and $500 a day in fuel,” He said. “And I work seven days a week, so the costs really mount up.”
Graves continued, saying it was especially difficult for himself, and indeed all farmers in the region, as there are very few jobs he can do on his farm that don't rely on gasoline to work.
“It's especially difficult for farmers to adjust to rising costs because there are very few places where you can cut fuel costs in agriculture,” Graves said. “We still have to crop the ground, which takes the same amount of fuel. If you're a diligent farmer...it (still) takes the same amount of gallons to cover a field.
“I think at the end of the day, we just have to hope like hell that the farming market has a little bit of a bump when we're ready to sell our produce to recoup the added fuel costs.”
Parent stated there was a lack of understanding by the public when it comes to the cost of fuel and the price of crude oil.
“I think what people need to realize is that crude products and refined products are two completely separate commodities,” said Parent. “Each have their own individual supply and demand fundamentals – it's not abnormal for the price of crude oil to be going one way and the price of refined products to be going the other. That's something the public needs to understand.”
Jason Toews, co-owner of the website GasBuddy and renowned as being one of top petroleum experts in the country, said he believes the current price of gas could reflect the added costs of extracting crude oil.
“It's easy to see that over the past ten years, the price of gas has risen tremendously,” Toews said, pointing out gas in December 2003 was as little as 57 cents per litre.
“But I think that's partly because easy to produce gasoline has really fallen by the wayside. These days, oil is harder to get at for these companies, so there's an added expense to their work and that filters down the system until it reaches petroleum sellers. It's much more costly today to pull crude oil and get gasoline from it than it was a few years ago.”
Toews added that it was hard to defend gasoline and oil companies and their decisions when it comes to deciding what price to sell at when they have all been announcing huge, near-record profits over the past few years.
He said he expected gas prices to come back down again in Alberta over the next few weeks, as the refinery in Edmonton gets back on track.
Bonnyville Mayor Ernie Isley said he felt oil companies have identified certain communities in the province as being “affluent”, where residents are able to afford to pay more for gasoline.
“I definitely believe there is a deliberate manipulation amongst certain communities in this province,” Isley said. “It always bothers me when you can buy gas in Cold Lake for cheaper than you can in Bonnyville, and it's been that way for years.”
“These companies would have you believe certain areas must pay a higher price because of the freight distribution costs. But that doesn't seem to be the case when you consider the price Bonnyville is paying compared to other communities.”
Gordon McEwen, a resident of Bonnyville said,“I don't quite understand why we're paying a premium for gas here at the pumps when oil prices are as low as they today. These organizations have no interest whatsoever in the consumer, they're only interested in their shareholders.”
After working for Shell for a number of years throughout his career in the oil industry, McEwen said he can see that there is a big difference between what companies are paying for petroleum and what they are selling it for.
Another Bonnyville resident said the price of gas has been “ridiculous” for a number of years, stating it was getting to the point where he was considering ditching motorized vehicles for a cheaper mode of transport.
“I've lived in this town for a long time now and I've only ever seen gas prices go one way,” he said. “We always hear about why prices need to go up, and the disasters that are causing it, but we never see prices come back down once things have settled back down. These companies always make excuses over why the price needs to go up and it's getting to be too much. Before long I'll get rid of my truck and start walking and biking around town – it would certainly be a lot cheaper.”
Jeremy Sadler, a resident of Calgary visiting family and friends in Bonnyville, said he noticed a significant increase in the price of gas between the two places, expressing his surprise at the cost in Bonnyville.
Another resident said it's becoming difficult to afford gas alongside other necessities needed to live, especially for those in lower paying positions.
Graves said sooner or later something has to be done in order to regulate prices, otherwise there could be an influx of people ditching their cars in favour of cheaper transportation.
“Somewhere along the line an independent watchdog has to step in and do an audit to determine exactly what is going on,” he said. “Then the government needs to step up and take action to put costs where they should be.”
Graves added, “The problem is, the (petroleum) industry is controlled by large, major corporations and they aren't answerable to us. They aren't answerable to anybody other than their investors. Something has to be done to change that, to make costs more affordable for the average, everyday resident.”
