"Why are fuel prices so high?"
The question gets asked a lot, and the Lac La Biche POST newsroom found an article today with a possible explanation to part of it. In the last 10 paragraphs of a long-ish story that ran across the Great West Media news networks by Nelson Bennett, the Loonie effect is explained very well.
You may have missed it, so here are the juicy bits in a quick, two-minute read:
Excerpt from Original story by Nelson Bennett
Canadian oil producers benefit from the lower dollar, but Canadian motorists suffer because American gasoline prices affect prices in Canada, even when the gasoline is refined in Canada.
At current exchange rates, Canadian producers get more than $100 per barrel when oil is at US$80 per barrel, according to the Canadian Association for Petroleum Producers (CAPP). But when it comes to refined products – gasoline and diesel – the low dollar means less buying power for Canadians.
“We export a lot of crude,” says Vijay Muralidharan, an oil and fuel analyst and owner of Calgary-based R Cube Economic Consulting. “We also import a lot of products, like gasoline and diesel in different parts of Canada from the U.S. So the flip side is you actually pay U.S. dollars. You spend more to get the products.”
Pacific Northwest gasoline spot prices were US$4.54 a gallon on September 30 ... If the Canadian dollar were on par with the American dollar, that would translate to $1.14 per litre.
Dan McTeague, president of Canadians for Affordable Energy, estimates the impact of a weak loonie on gasoline prices in B.C. to be about $0.46 per litre. That’s how much more he estimates British Columbians are paying than they would if the Canadian dollar were on par with the U.S. dollar.
“What it means is the lack of having a petro-dollar that responds to higher oil prices, the consumers are being hit with a profound loss of purchase power on a scale that most don’t really comprehend,” McTeague said. “The weakness of the Canadian dollar is, in my view, materially one of the main drivers of inflation in Canada.”
The price Canadian refiners charge for refined gasoline is influenced by American refined fuel prices.
“Whether you like it or not, our domestic prices in Canada [for gasoline] are set by what happens in the U.S.,” Muralidharan said. “There is a currency impact on pricing.”
Pacific Northwest gasoline spot prices were US$4.54 a gallon on September 30, McTeague said. If the Canadian dollar were on par with the American dollar, that would translate to $1.14 per litre. But because of the current exchange rate, it comes out to $1.58 per litre, he said.
With GST, that’s $0.46 per litre more that British Columbians are paying than they would if American and Canadian dollars were at par.
“My point is, we’re paying dearly for the limping loonie,” McTeague said.
