If you’ve been driving in Canada for some time, you may have noticed that gas is currently much more expensive. Since motorized transport was popular in North America, this is the first time gas price will hit 167.9 cents. At the time of writing this piece, Toronto gas prices were at 167.9 cents and 194.9 cents in Vitoria, respectively.
Why is Gas Expensive in Canada?
But why gas is so expensive in Canada?. Some of these reasons are obvious, others aren’t.
- Adverse Effects of Covid-19
Contrary to people’s perceptions that Russia’s invasion of Ukraine is the cause of the hike in gas prices worldwide, the price of Canadian gas has greatly increased long before Russia declared war on Ukraine. Before the invasion, gas price in Canada was already hitting an unbelievable $1.60 per litre.
One of the major reasons why gas is so expensive in Canada is due to the adverse effect of the novel Covid-19 that struck the world. During Covid, a lockdown was put in place. Companies were forced to close down. Others resorted to allowing their staff to work from home to keep their companies afloat.
While all these were happening, the demand for gas dropped drastically. Now the world is coming out of Covid. Only fewer companies still allow civil servants to work from home. And with more oil-guzzling companies opening their doors, the demand for gas has greatly increased.
Meanwhile, during the outbreak of the virus, the energy industry experienced a major setback. Not enough was produced. And as the world is rapidly returning to normal, the industry has not been able to commence work optimally.
If it were before, the U.S shale oil production would have saved the day. But not even the United States shale oil production was spared by the horrible effect of Covid that showed no mercy. For context, shale oil production refers to the massive untapped U.S oil reserves that made the United States the largest oil and gas producer. This position they held until the pandemic.
Oil investors in the U.S are skeptical about ramping up shale oil production. Although the oil production nations (OPEC) are currently ramping up production, it is still not enough to bring the gas price back to normal.
Unfortunately, the Canadian oil production sector can’t do the magic either. Despite the gas price hike, the quantity produced can’t still be increased to quench the undying need for it in the country.
2. World’s Sanctions on Russia
It is still not the invasion of Russia in Ukraine that has affected the gas supply. Instead, the response of the world made it difficult for Ukraine to supply gas. A series of sanctions has been thrown at Russia since the war started.
Presently, Canada has banned the importation of Russian oil. Whereas, the economy of most Western countries largely depends on Russia’s oil importation to thrive. While the rest of the world could not directly refrain from importing oil from Russia, more financial sanctions on the country put it at great risk.
As of now, many Western energy firms have pulled out of Russia. Companies like Shell, BP, and Exxon-Mobil, have all announced their plans to move out of Russia. The numerous sanctions thrown at Russia have made it extremely difficult for the country to sell its oil abroad.
Without a doubt, Russia is one of the largest producers of oil in the world. The abrupt removal of Russia’s oil from the world market has greatly reduced the availability of oil globally. This leaves numerous refineries and countries stranded. Whatever oil they can get comes at a premium.
You Might Want to Read: Why Is Lumber So Expensive in Canada?
3. Lack of Pipelines in B.C
The removal of Russia’s oil from the market leads to inflation due to scarcity. However, that doesn’t explain why oil is sold for a price that is 20 cents higher than the already inflated gas price in British Columbia.
This means that among the cities in Canada, people in British Columbia spend more to get gas than others.
Some cities like Toronto and Montreal are connected to the North American latticework of pipelines. It connects diverse pipelines from Chicago to the Gulf Coast. It makes it easier for people on this coast to get oil. Unfortunately, the southwest coast of British Columbia doesn’t enjoy equal opportunity.
There is only one refinery in the entire city of Burnaby. The pipeline in Alberta used to transport oil from Washington is old and less standard. Geographically, coastal B.C is quite isolated from the infrastructures put in place to barge gas to service stations. And this makes gas more scarce in that region. So the little they can get come at higher prices.