If the John Horgan government wants the BC Utilities Commission (BCUC) to prove gasoline wholesalers and-or retailers are gouging British Columbians with disproportionately high gas prices, more bureaucracy might be needed that will likely increase the cost of gasoline at the pumps.
That’s if the government and public insists on forcing gasoline retailers to submit detailed data to the BCUC, as it did with a limited number during a one-year pilot project.
Or, it could just buy much of the information it needs on wholesale gas pricing from third-party sources.
Those are some key takeaways of a BCUC report on a pilot project in which gasoline retailers were required to report data to the BCUC to provide a clearer picture on how, when and why gas prices went up or down.
The report was released this week and the BCUC is now seeking public feedback.
One thing the public will want to know about is the cost of the additional bureaucracy, and how it might hit them in the pocketbook at the pumps, should the province start requiring all retailers to provide data to the BCUC on an ongoing basis.
“Collecting retail fuel market data comes with costs, such as investments in technology and labour expenses,” the report notes. “These costs are ultimately paid for by consumers at the pump, or BC taxpayers.
“It is reasonable to expect that if the BCUC were to require all retail stations to report data on an ongoing basis, these costs would be passed on to customers as an additional cost at the pump.”
In other words, B.C. motorists would need to pay more at the pump to find out why they pay more at the pump.
In 2019, the Horgan government ordered the BCUC to investigate high gasoline prices in B.C. The BCUC was explicitly told not to examine provincial policies that might contribute to the fact Vancouver often has the highest gasoline prices in North America -- policies like carbon taxes and its low carbon fuel standard.
Taxes, after all, could not explain why the wholesale price – or rack price -- of gasoline differed so much in B.C. compared to other jurisdictions.
The BCUC inquiry was inconclusive. In November, 2019, the inquiry reported it could not explain a $0.13 per litre disparity in the wholesale price between B.C. and other jurisdictions.
The BCUC inquiry said that, though there was no evidence of collusion between retailers or wholesales, the gas market in B.C. was not truly competitive.
The B.C. government enacted the Fuel Transparency Act, in order to force gasoline suppliers to provide the BCUC data it needed to get a clearer picture of how wholesale and retail gas pricing works.
At the government’s direction, the BCUC ran a one-year pilot program, in which retail dealers were required to submit data about their operations and sales to the BCUC.
It selected 87 retailers, and asked them to file monthly reports with the BCUC for one year, including “detailed daily information on their retail operation.”
“Despite extensive outreach efforts by the BCUC (including e-mails, registered mail, and phone calls) not all the retail stations selected for participation in the Retail Pilot complied with the BCUC’s information requests,” the report notes. “In total, the BCUC received reports from 60 retail stations over the course of the Retail Pilot.”
And in some case, BCUC staff had to help the retailers with their reporting.
And, once again, the findings appear to be as inconclusive as the initial inquiry with respect to price-gouging.
“Because the small sample size and limited collection period (a single year) make it difficult to draw any firm conclusions, the BCUC instead looked for indications in the data as to whether greater price transparency measures would be beneficial for British Columbians.”
The BCUC notes that “high market concentration can be a sign that certain firms have market power” that might allow for setting disproportionately high prices.
So is B.C.’s market highly concentrated?
“The results of the BCUC’s analysis suggest that, at the province-wide level, B.C.’s retail fuel market has low to moderate market concentration,” the report concludes. In Metro Vancouver, however, it did find the market to be “moderate to high market concentration.”
One sign of gouging would be retail prices that rose disproportionately to increasing wholesale prices.
“We found that, at the macro level, there is a strong correlation between retail and wholesale pricing,” the report states. “Variations in wholesale prices appear to explain the vast majority of the variation in retail prices for Retail Pilot participants.”
“A detailed understanding of individual retail station business operations, including inventory practices, supplier agreements, and other factors that affect retail pricing, would help shine a clearer light on pricing practices.”
But that detailed understanding would require a much more exhaustive and bureaucratic reporting scheme that would, ultimately, see increased costs for retailers passed on to the their customers.
“It is reasonable to expect that if the BCUC were to require all retail stations to report data on an ongoing basis, these costs would be passed on to customers as an additional cost at the pump. Factors like whether a retail station’s records are digitalized or recorded by hand will have a significant impact on the level of financial burden associated with reporting and the ultimate cost to consumers.
“Working with Retail Pilot participants also required a significant time commitment from BCUC staff, who communicated with and supported the retail stations.”
“Further, certain retail price information is available for purchase from third-party sources.”
Over the course of the pilot project, the BCUC collected information on the price of gasoline and diesel from Kalibrate Canada Inc. and the Oil Price Information Service.
“The BCUC found this private price data to be of comparable quality (or in some cases, superior quality, when Retail Pilot participants struggled to submit complete or accurate data), with no associated burden to retail stations.”
According to GasWizard, regular gasoline will jump two cents tomorrow to $1.74 per litre in Vancouver, followed by another three cent jump to $1.77 per litre.
But it's no mystery why gasoline prices are rising here and elsewhere. The North American benchmark crude, West Texas Intermediate, just cracked the US90 per barrel mark. It's now selling for US$92.31 per barrel.
