British Columbians are being “ripped off” by an “oligopoly” of five major oil and gas producers and suppliers, says Bruce Ralston, the minister of Jobs, Trade and Technology.
Ralston was reacting to a final report by the B.C. Utilities Commission on gasoline prices in B.C.
The commission said a $0.13 per litre price difference in wholesale prices in B.C. compared to other parts of Canada is unexplained, but appears to the result on an uncompetitive market.
“We know — and one of the reasons for calling for this inquiry — was that too often people feel that they’ve been ripped off when they fill up at the gas station,” Ralston said in a press conference, following the release of the BCUC’s final report.
“And they’re right. Today’s report from the utilities commission shows that there’s significant evidence that support people’s view that price gouging exists in the market.”
If there is gouging, it appears not to be occurring at the retail level, however.
“There is no evidence to suggest that collusion among the retail operators exists nor is there evidence of cartel behaviour,” the BCUC final report concludes.
However, the BCUC adds: “Prices move up and down in a manner that gives the appearance of a functioning competitive market but it is also possible this pricing behaviour is tacitly choreographed such that there are numerous price changes throughout the day.”
There is a gulf between what British Columbians and other Canadian pay for gasoline that cannot be explained by normal market forces, Ralston said. The commission found that British Columbians generally pay about $490 million annually above what they should be paying under a properly functioning gasoline market.
The report points out that five producers and suppliers supply the B.C. market with oil and refined fuels. That is considered to be a constrained market.
“The commission found that the wholesale gasoline market is — and I’m quoting — ‘not truly competitive that is best described as an oligopoloy,’” Ralson said.
“The wholesale gasoline market isn’t truly competitive. People in British Columbia are paying an additional 13 cents per litre that are completely unexplained by any market forces and is a result of the anti-competitive environment in which these five companies operate.”
The commission was asked by Premier John Horgan to get to the bottom of gasoline price spikes in B.C. in May, after gas prices spiked as high as $1.72 per litre in Vancouver.
But the commission was told it was not to consider government policies like taxes or B.C.’s low carbon fuel standard as part of its inquiry.
That didn’t stop a number of companies making submissions to the BCUC to refrain from pointing to both high taxes and the low carbon fuel standard as contributing factors to B.C.’s high gas prices.
Ralston defended the decision to explicitly exclude government policies from the commission’s inquiry, saying that, even when taxes are accounted for, there is still a $0.13 per litre difference that cannot be explained.
“As the commission itself said today, there’s an unexplained 13-cent price differential, separate from normal market forces and completely separate from government policies and taxation,” Ralson said.
The Kent Group, a petroleum industry analyst firm, has pointed to two significant increases in wholesale gas prices in B.C. following implementation of the carbon tax and low carbon fuel standard. The Kent Group has suggested the low carbon fuel standard may at least partly explain the higher wholesale price for B.C., but has not been able to put a number to it.
As the commission points out, the wholesale price for other parts of B.C. is based on wholesale prices in Edmonton, whereas in southern B.C. the prices are set by a Pacific Northwest benchmark. In other words, gas prices in the Pacific U.S. can have an influence on wholesale prices here.
As for whether the B.C. government plans to implement price controls, or some other form of regulation, Ralston said the government will be studying the report further before it makes any decision.
Asked if he thought there was any way the B.C. government could have some influence on the types of fuels that are allocated on the Trans Mountain pipeline, in order to provide more refined fuels to B.C., Ralston noted that the BCUC concluded that may not have an impact on prices here, since they are essentially set by a Pacific Northwest benchmark.
“Even if there is more gasoline, refined product, in the pipeline, it wouldn’t necessarily lower the price,” Ralston said.
“If cheaper gasoline came down the pipeline — cheaper than the existing price from Alberta — it would not affect the price in the present context,” Ralston said.
The BCUC has recommended that the public and industry be given one month to respond to its final report.
“The government would have to consent to that 30-day period, which I’m going to recommend to the government that we do that,” Ralston said.