CORRECTED: Who decides the price of gas? Not us, says province

[Editor's note: the original headline of this article read "Who decides the price of gas? Not us, says Sask Party". However, Assistant Deputy Minister Cory Hughes is a civil servant and not necessarily representative of the Saskatchewan Party. The headline has been updated for greater accuracy.]

With oil and gas companies such as Exxon Mobil and Chevron posting record-breaking profits while inflation soars and pump prices take increasingly large bites out of Canadian wallets, MooseJawToday.com asks what goes into setting the price per litre.

“The cost of gasoline is a component of the price of oil, plus the cost of refining that oil into a product, then transporting and marketing those final products, plus provincial and federal taxes,” said Cory Hughes, Assistant Deputy Minister — Resource Development with the Ministry of Energy and Resources. “The Government of Saskatchewan has limited influence on gasoline prices. There is provincial tax associated with gasoline, so that would be the one and only area that the government can influence gasoline prices.”

The federal government directed our inquiry to information found on Canada.ca:

• Fuel consumption levies in Canada https://www.nrcan.gc.ca/our-natural-resources/domestic-and-international-markets/transportation-fuel-prices/fuel-consumption-taxes-canada/18885
• Why gasoline prices go up and down? https://www.nrcan.gc.ca/our-natural-resources/domestic-and-international-markets/transportation-fuel-prices/questions-and-answers/why-gasoline-prices-go-and-down/4931
• Why Gasoline Prices Vary Across Canada https://www.nrcan.gc.ca/our-natural-resources/domestic-and-international-markets/transportation-fuel-prices/questions-and-answers/why-gasoline-prices-vary-across-canada/4609

According to the above websites, the answer ultimately lies with whoever is operating the fuel station and whatever it cost them to get their supply. Four factors stand out:

1. The cost to locate and get crude oil out of the ground,
2. The cost to change crude oil into gasoline (refining margin),
3. The cost to operate the local station (retail margin), and
4. Taxes to provincial, federal, and sometimes municipal, governments.

These factors align with those explained by Hughes.

The interconnectedness of the world reliance on crude oil means that virtually any world event — war, economic events, pandemics — has an instant effect on prices.

Worldwide, demand continues to outstrip supply, causing a steady increase over time. That trend is negatively influenced by movement on climate change. The cost of building or expanding fossil fuel supply facilities is increasing even as renewable energy becomes cheaper, faster.

In the last 10 years, the price of solar has dropped more than 90 per cent, making it the cheapest source of power by far.

“Gasoline is a commodity, so it’s really set on supply and demand,” Hughes said.

Nationally, prices are now falling again. According to the CAA gas price tracker, the highest national average in the past year was June 14, 2022 at 209.7/litre.

Canada is a net exporter of crude oil, producing significantly more oil than it can consume. It was the fourth-largest producer in the world in 2021 with 5.5 million barrels per day — six percent of global output, and exported 4.67 million barrels per day, mostly to the US.

Could the province help with gas prices?

In May, the NDP Opposition proposed a plan to share resource windfall profits with Saskatchewanians. Premier Scott Moe dismissed the idea and suggested that the NDP don’t have enough respect for the contribution that the oil and potash industries make to the economy. He instead announced a ramped increase to the minimum wage.

However, in June, Moe hinted that the Sask Party might pause the provincial gas tax after all, depending on high natural resource prices — a plan that sounds eerily like that of the NDP.

“They did pause the gas tax in Alberta,” Hughes said. “And I think the premier’s on record in June as saying that if we do have a provincial surplus due to high natural resource prices, the Government of Saskatchewan would review options to return money to Saskatchewan citizens.

“That would be a better question for the Premier’s Office, but the premier did make those comments several times in June.”

Hughes pointed out that the federal government’s influence on gas prices is also considerable.

“The increasing carbon tax and the upcoming clean fuel standard … would make a good question for the federal government.”