Gas Prices

[WestCoastEcho]

Originally Posted by whatnext

Hmm, not according to the Financial Post or Global:

'A devaluation of oilsands assets': New rules on sulphur will make a fifth of output uneconomic within two years

From the lack of available pipeline capacity to the potential adoption of electric cars, there is no shortage of threats facing the Canadian oilsands. But the latest menace lies in a seemingly innocuous and highly common element: sulphur.

Long a byproduct of the heavy oil industry, sulphur is so common that it’s become a part of the general landscape at mining sites such as Syncrude Canada Ltd.’s Mildred Lake facility (now majority owned by Suncor Energy Inc.), where massive blocks of sulphur byproduct are stacked several storeys high, like a kind of yellow-stained low-rise apartment complex.

But global regulators are now trying to stem sulphur-dioxide emissions in a widespread crackdown, one that could shrink the market for heavy crude and force Canadian oilsands companies to stomach an even steeper discount for their product...

...CERI released a report at the end of July that found as many as 574,000 barrels per day of oilsands production, or roughly 20 per cent of unconventional oil projects, would not be economic under a scenario where sulphur levels are lowered to the new IMO standards...

https://business.financialpost.com/commo...ate-threats-to-canadas-oilsands-industry

New marine fuel standards expected to tank oilsands crude prices in 2020

Canada’s oilsands industry, hard hit by a price storm this year, could be sailing straight into a pricing typhoon stirred up by new fuel standards for the international shipping industry.

The tighter pollution rules by the International Maritime Organization, dubbed IMO 2020, are set to take effect Jan. 1, 2020, resulting in the sulphur content limit of “bunker” fuel on ships dropping from 3.5 per cent to just 0.5 per cent.

The switch is expected to wallop prices for heavy oil containing high levels of sulphur — exactly the kind of the raw bitumen that makes up about half of Canada’s 4.4 million barrels per day of crude oil production...
https://globalnews.ca/news/4259018/2020-marine-fuel-standards-oilsands-crude-price/

This analysis is better:

https://www.schroders.com/en/sysglobalassets/digital/insights/2018/pdf/imo-report2.pdf

See page 6 and 7:

Lack of refiner investment:

Unlike previous investment cycles, the prospect of growing electric vehicle demand reducing future gasoline and diesel demand, coupled with shareholder demands for return of capital, has prompted greater capital discipline amongst refiners. Consequently fewer large new refineries (designed to take more light crude) have been sanctioned over the last three years(apartfrom the Middle East). Instead a greater amount of capital is being returned to shareholders by refiners (for example 60% of FCF generated by Phillips 66 and Marathon this year will be returned through buybacks or dividends). Likewise, the downstream segment has been a significant FCF generator for integrated energy companies, and is subject to the same capital discipline applied to the upstream business.

Global crude slate:
Venezuelan production (previously a source of heavier crude) has fallen around 0.8mb/day since 2016 and US onshore light shale crude has increased its share of the global market. PDVSA’s cash flow issues has resulted in many US refiners being unwilling to transact with them.This means that there will be less heavy and medium grade crude, just when more is required. Most refiners are already taking the maximum light crude they can whilst maintaining their product split. Refiners in the US are now focused on increasing their imported volumes of heavy crude from Canada and Maya(Mexico).

Discussions with refining managers suggest that at current utilisation rates European refiners are maxed out in terms of distillate production. They therefore cannot bring much production online in reaction to any change in demand and price, without changing their crude slate or upgrading their facilities.

The first thing refiners will do in reaction to higher distillate demand is increase utilisation in Asia and Europe (where there is spare capacity). However, incremental distillate production beyond that will require investment in refineries to increase cracking capacity, or greater desulphurisation capacity. The more complex refiners with morehydrotreating/coker/hydrocracking capacity are in a better position for a post IMO 2020 market, because they have flexibility on what crudes they take, and can even take in HSFO and crack this into distillate (through cokers)and hydrotreat to remove sulphur (below the 0.5% threshold).

[Klazu]

Price and tax breakdown:



Vancouver being the most expensive Canadian city is actually only a recent phenomenon:

• Video Link

[WestCoastEcho]

Originally Posted by Klazu

Price and tax breakdown:



Vancouver being the most expensive Canadian city is actually only a recent phenomenon:

• Video Link

Don't forget BC has a special law about green fuel, which requires that only a special, boutique blend of fuel is to be sold in BC. This blend contains a certain percentage of renewable fuel content, and it is generally agreed that this requirement adds additional cost, as we can't just buy fuel off the rack from just any jurisdiction, it has to be specially blended for us at the refinery before it can be sold here.

[s211]

Originally Posted by WestCoastEcho

Don't forget BC has a special law about green fuel, which requires that only a special, boutique blend of fuel is to be sold in BC. This blend contains a certain percentage of renewable fuel content, and it is generally agreed that this requirement adds additional cost, as we can't just buy fuel off the rack from just any jurisdiction, it has to be specially blended for us at the refinery before it can be sold here.

A factor that I believe to be outside of the permitted scope of the utility commission's terms of reference for its price review.

[whatnext]

Originally Posted by WestCoastEcho

Don't forget BC has a special law about green fuel, which requires that only a special, boutique blend of fuel is to be sold in BC. This blend contains a certain percentage of renewable fuel content, and it is generally agreed that this requirement adds additional cost, as we can't just buy fuel off the rack from just any jurisdiction, it has to be specially blended for us at the refinery before it can be sold here.

Thanks to Gordon Campbell!

[mezzanine]

Originally Posted by WestCoastEcho

Don't forget BC has a special law about green fuel, which requires that only a special, boutique blend of fuel is to be sold in BC. This blend contains a certain percentage of renewable fuel content, and it is generally agreed that this requirement adds additional cost, as we can't just buy fuel off the rack from just any jurisdiction, it has to be specially blended for us at the refinery before it can be sold here.

IMO Low carbon Fuel Requirements has been a public policy success. It requires less carbon emissions for the whole production, refining and transport of transport fuels. Blending in more renewable fuel can lower carbon intensity, but also things like investing in more efficient refineries, reducing gas flaring and electrifying processes.

California was the first jurisdiction to introduce LCFR, gordon campbell and arnorld Schwarzenegger worked together to introduce similar programs. By all measures in Cali and BC, it dramatically reduced carbon emissions over the past 10 years with most people not even aware of the program until now. Cali is even strengthening LCFR in the future.


Really, there has been no changes with LCFR to my knowledge recently, but why the gas price increase now, and why blame the LCFR?

[aberdeen5698]

Originally Posted by Klazu

Price and tax breakdown:

The big part missing from this diagram is how much of the "wholesale price" is profit vs. cost. The retailer isn't the only one taking a profit.

The other piece that seems a bit suspect to me is this: if the retailers are only making 10 to 11 cents per litre, how come they have price swings of around 15 cents per litre?

[Bdawe]

Originally Posted by aberdeen5698

The big part missing from this diagram is how much of the "wholesale price" is profit vs. cost. The retailer isn't the only one taking a profit.

The other piece that seems a bit suspect to me is this: if the retailers are only making 10 to 11 cents per litre, how come they have price swings of around 15 cents per litre?

Averages, how do they work?

[WestCoastEcho]

Originally Posted by aberdeen5698

The big part missing from this diagram is how much of the "wholesale price" is profit vs. cost. The retailer isn't the only one taking a profit.

The other piece that seems a bit suspect to me is this: if the retailers are only making 10 to 11 cents per litre, how come they have price swings of around 15 cents per litre?

That's assuming that the retailer is actually making a profit on the gas; sometimes, retailers will sell at cost, or just under cost to grab market share, and because they believe they can make up the lost margin through other ancillary revenue, such as selling coffee or car washes.

[WestCoastEcho]

Originally Posted by mezzanine

IMO Low carbon Fuel Requirements has been a public policy success. It requires less carbon emissions for the whole production, refining and transport of transport fuels. Blending in more renewable fuel can lower carbon intensity, but also things like investing in more efficient refineries, reducing gas flaring and electrifying processes.

California was the first jurisdiction to introduce LCFR, gordon campbell and arnorld Schwarzenegger worked together to introduce similar programs. By all measures in Cali and BC, it dramatically reduced carbon emissions over the past 10 years with most people not even aware of the program until now. Cali is even strengthening LCFR in the future.


Really, there has been no changes with LCFR to my knowledge recently, but why the gas price increase now, and why blame the LCFR?

The specific issue is that BC has a unique low carbon fuel standard (instead of working in coordination with Washington, Alberta and California). This add additional costs to fuel suppliers, with some estimates that it adds at least 15 cents per litre if we did coordinate our low carbon fuel standard with other jurisdictions.

[WarrenC12]

That chart is such garbage. It goes into minute detail on all of the taxes, but when it comes to the suppliers, its:

"Retailers" are the stations themselves? So in that other price is the extraction of the oil, delivery to refineries, refining, delivery to retail? All taking cuts? Sometimes going back to the same company?

A giant black hole. Gasbuddy is a paid industry shill, I hope everyone is aware.

[CanSpice]

Originally Posted by WarrenC12

That chart is such garbage. It goes into minute detail on all of the taxes, but when it comes to the suppliers, its:

"Retailers" are the stations themselves? So in that other price is the extraction of the oil, delivery to refineries, refining, delivery to retail? All taking cuts? Sometimes going back to the same company?

A giant black hole. Gasbuddy is a paid industry shill, I hope everyone is aware.

Yeah, for a "senior industry analyst" Dan McTeague doesn't provide any actual analysis of the industry.

[WestCoastEcho]

Originally Posted by WarrenC12

That chart is such garbage. It goes into minute detail on all of the taxes, but when it comes to the suppliers, its:

"Retailers" are the stations themselves? So in that other price is the extraction of the oil, delivery to refineries, refining, delivery to retail? All taking cuts? Sometimes going back to the same company?

A giant black hole. Gasbuddy is a paid industry shill, I hope everyone is aware.

Gasbuddy is owned by a subsidiary of United Communications Group, which is a business analytic firm.

And the "retailers" are the gas stations themselves. And yes, everyone along the chain does take a cut, but remember that the retailers are often independent coops or privately owned franchises. These owners of gas bars have their costs too, which they need to cover (such as taxes, loans, payment processing, personnel costs). Nothing is free.

And the NEB has an article on the refining margin, with a chart:

https://www.neb-one.gc.ca/nrg/ntgrtd/mrk...sdffr-eng.html?=undefined&wbdisable=true

Per the NEB, the refining margin is about 29 cents per litre, which is not that much higher than most of Western Canada. The higher refining margin in Canada is a reflection of transportation costs to get the product to market due to supply constraints. Note that the provinces with lower refining margins are jurisdictions with surplus refining capacity already in place, or have easy access to refining capacity in neighbouring jurisdictions.

[WarrenC12]

So gas buddy can't Google as much as you can? Seems like a pretty shitty "business analytics" firm.

Or, hear me out here, maybe they are trying to represent their special interests in a favorable light.

It's so see through, please don't defend them.

[Klazu]

I think the interesting thing here is the right-hand side statistics, where one can see that the amount of taxes is actually fairly similar across all major cities, yet somehow gas ends up being much more expensive in Vancouver than anywhere else. Someone is making a good profit from us.

Someone on another forum also made the good point that taxes do not fluctuate constantly, like the daily prices do. So, taxes cannot cause the daily price fluctuation of $1.30 - $1.70 that we have been seeing in the past few weeks.

Somehow all of this reminds me of how foreign investments' impact on Vancouver real estate market was a taboo, never to speak off only few years ago, only to be revealed having been exactly as devastating on the markets as everyone thought it would be.

I don't know who exactly I should be pointing my finger at, but there is someone in the delivery chain making a bank on our expense...

[mezzanine]

Originally Posted by WestCoastEcho

The specific issue is that BC has a unique low carbon fuel standard (instead of working in coordination with Washington, Alberta and California). This add additional costs to fuel suppliers, with some estimates that it adds at least 15 cents per litre if we did coordinate our low carbon fuel standard with other jurisdictions.

Fuel approved by california are deemed to be "identical" to fuel criteria in BC and I suspect we can use their stock. Washington and oregon are moving to adopt cali's standards.

The only difference I can find is that cali penalizes land/carbon-intense fuel from AB while BC doesn't. BC is the only canadian province with LCFS and AB refineries have to produce fuel for BC that's different than the rest of canada.

I'd wonder where this will be in 5 yrs. This is a chance for AB to get ahead of the curve and push for an canadian LCFS that has oil sands fuel on side. Or they can see if they can get by fighting fuel standards.

.....

I would agree that it would be easier and cheaper (for now) to do nothing for GHG emissions.

The low carbon fuel standard (LCFS) was enacted in BC in 2008 with the objective of reducing the average carbon intensity of transportation fuels by at least 10% by 2020. Similar legislation exists in California but with one vital difference - BC has not incorporated indirect land use values into the lifecycle analysis.

With this provision, California's LCFS indicates higher emissions from unconventional oil, such as from Alberta’s oil sands, than from conventional sources. As a result, the Canadian petroleum industry has come out in support of the BC standard and has criticized California’s approach. News releases from the BC and California governments indicate that the fuel standards are identical, despite the differences in direct and indirect land use calculations. Whether or not BC intended to structure their policy to favour the oil sands is not as important as the fact that it could be perceived to be “oil-sands friendly.”

[WestCoastEcho]

Originally Posted by Klazu

I think the interesting thing here is the right-hand side statistics, where one can see that the amount of taxes is actually fairly similar across all major cities, yet somehow gas ends up being much more expensive in Vancouver than anywhere else. Someone is making a good profit from us.

Someone on another forum also made the good point that taxes do not fluctuate constantly, like the daily prices do. So, taxes cannot cause the daily price fluctuation of $1.30 - $1.70 that we have been seeing in the past few weeks.

Somehow all of this reminds me of how foreign investments' impact on Vancouver real estate market was a taboo, never to speak off only few years ago, only to be revealed having been exactly as devastating on the markets as everyone thought it would be.

I don't know who exactly I should be pointing my finger at, but there is someone in the delivery chain making a bank on our expense...

It's very much supply and demand playing a role as here in BC, there's insufficient supply compared to demand, and government policy has a ton to do with the lack of supply and a lack of ability to expand said supply.

Also, note that BC's refining margin is already high because the Parkland refinery doesn't produce regular gas; it specializes in high margin products, such as Premium gas, which allows it to generate a higher margin on its minimal output. It is a boutique shop that generates correspondingly high margins.

Notice how Montreal, Toronto, Calgary and Halifax have significantly lower wholesale prices; all 4 cities are in jurisdictions where there's more supply than demand, or access to supply from neighbouring jurisdictions, which causes prices to deflate. As a infographic as to how the situation looks on the supply side:

https://www.canadianfuels.ca/Blog/June-2...lly-use-mostly-U-S-gasoline-in-our-cars/

[twoNeurons]

Originally Posted by mezzanine

Fuel approved by california are deemed to be "identical" to fuel criteria in BC and I suspect we can use their stock. Washington and oregon are moving to adopt cali's standards.

.....

I would agree that it would be easier and cheaper (for now) to do nothing for GHG emissions.

No kidding. Considering California has the population of Canada, I'm sure that boutique fuel is NOT the problem.

[WestCoastEcho]

Originally Posted by twoNeurons

No kidding. Considering California has the population of Canada, I'm sure that boutique fuel is NOT the problem.

The entire Western North American fuel market is incredibly tight; the West Coast of the US (Washington, Oregon and California) is part of PADD 5, which is one of five Petroleum Administration of Defense Districts (PADDs) as defined by the US EIA. PADD 5 is heavily isolated, with only the Trans Mountain pipeline being the only non-rail connection that runs East to West through the Rocky Mountains. And as the US EIA puts it:

https://www.eia.gov/analysis/transportationfuels/padd5/pdf/transportation_fuels.pdf

Because PADD 5 is isolated, in-region refineries are the primary source of transportation fuels for PADD 5. In 2013, PADD 5 refinery production was sufficient to cover about 91% of in-region motor gasoline demand, 96% of jet demand, and 113% of distillate demand. Heavy reliance on in-region production further complicates the supply chain when disruptions occur. When disruptions occur, all of these factors noted above combine to limit short-term supply options, lengthen the duration of supply disruptions, and cause prices to increase and remain higher for a longer period than would be typical in markets outside PADD 5.

The US West Coast is already short on gas and jet fuel supplies to begin with. And many of the US refineries on the West Coast sell the bulk of their product through long term contracts, meaning BC gets whatever scraps we can get from the spot market to fill our existing needs. This is why when a refinery goes down in Washington, fuel prices spike significantly in BC.

[mezzanine]

Originally Posted by WestCoastEcho

The US West Coast is already short on gas and jet fuel supplies to begin with. And many of the US refineries on the West Coast sell the bulk of their product through long term contracts, meaning BC gets whatever scraps we can get from the spot market to fill our existing needs. This is why when a refinery goes down in Washington, fuel prices spike significantly in BC.

That’s the same problem AB oil has now with the TMP and its expansion. Pipeline space is sold on contract to the highest bidder.

Jason Parent, managing director of the Canadian fuel analytics firm Kent Group Ltd., cautions that more pipeline capacity doesn’t ensure lower prices and it may not ease supply at all.

“It’s not that simple. Trans Mountain is part of the issue, but expanding Trans Mountain is going to take some time to have an effect on the market," he said, “and there is no guarantee it actually increases the amount of space on the line for refined product.”

Here’s the problem: the added supply capacity that the TMP/TMEP will provide is not actually aimed at helping B.C. meet its demands for lower-priced gasoline.

It was never a major consideration for building that expanded pipeline.

On the contrary, the TMEP is only aimed at sending more of Alberta’s diluted bitumen, synthetic crudes, and other oil blends to whomever and wherever they will command the highest price.

https://www.straight.com/news/1240246/ma...peline-will-not-solve-bcs-gas-price-woes