FAQs

Consumers apply a range of criteria when they shop for transportation fuel. They look for different grades of fuel, and may have a preference for one brand over another. Quality is never a question. Convenience is one criteria — choosing a filling station that’s easy to get to. Range of services is important for consumers who want access to a car wash, convenience store, etc. But the main focus is price, which explains why Canadian drivers have so many questions about how much they pay for transportation fuels.

Why does the price change so much?

Crude oil and wholesale gasoline and diesel are commodities like coffee or wheat. The value that traders place on a commodity changes based on market conditions and underlying supply and demand dynamics. Think about house prices. Although homes are not a commodity, their prices fluctuate in any particular market according to supply and demand.

Why isn’t the price of gasoline in lockstep with the price of crude oil? 

Crude oil and the transportation fuels derived from them — gasoline and diesel — are distinct commodities. Their prices respond to supply and demand conditions that are often quite different. Their market values change independently, at times moving in opposite directions. Recently, the global supply of crude oil has exceeded global demand. The demand has recently grown for gasoline in North America. This shift in the continental supply-demand balance exerts upward pressure on the price of gasoline. So while gasoline prices are down, they may not have declined to the same extent — or at the same time — as crude prices.

Why is petroleum fuel less expensive in the U.S.? 

Wholesale fuel prices include all refinery production costs including the cost of crude. The wholesale price is what the retailer pays when purchasing fuel at the wholesaler’s terminal or ‘rack’. Canada is part of an integrated North American wholesale fuels market. As a result, Canadian and U.S. wholesale fuel prices generally go up and down in tandem; however, wholesale fuel commodities are traded in U.S. dollars, so the price volatility in Canada is partly due to exchange rates. When the Canadian dollar falls in value relative to the U.S. dollar, the wholesale fuel price in Canadian dollars rises. 

The most significant factor in price differences between Canada and the U.S. is taxes. In 2023, Canadian taxes accounted for an average of 49 cents on each litre of petroleum fuel. At the same time in the U.S., the average tax component was approximately 21 cents per litre.

Why do different retailers in my community all seem to have the same price, why is gasoline more expensive in my community than elsewhere? 

Retail prices include wholesale fuel costs, transportation costs; carbon tax, federal, provincial and in some cases municipal taxes; and a margin to cover retail outlet operating costs and provide operators a profit. The pump price at any retail outlet is influenced by local supply and demand dynamics. So while retail pump prices generally rise or fall in response to changes in wholesale prices, individual retail outlets are continuously balancing the need to be competitive with the need to maintain a viable retail margin. Market size and remoteness, number of competitors, sales volumes, seasonal demand changes, and the range of services offered are just some of the factors at play. In a highly competitive local market, prices can be quite volatile as retail operators strive to remain competitive with other operators in close proximity. It’s a delicate balance. Pricing too low means losing money, too high means losing sales.

Don’t big oil companies set the price at the pump? 

Canada’s retail marketplace is actually quite diverse. A recent census by Kalibrate (2023 National Retail Petroleum Site Census) identified 66 different companies involved in the marketing of retail petroleum fuels with 97 distinct brands of gasoline. In numbers that are at odds with the traditional public image of the industry, integrated refiner-marketers control the price at only 22 percent of retail gas stations in Canada. The prices at 78 percent of stations, including many that operate under the brand of a major oil company, are controlled by proprietors or companies not involved in the refining of petroleum products.

Refinery disruptions are unusual. These facilities operate continuously at close to peak capacity 24 hours every day. They are not turned off without significant advance planning. Maintenance and upgrade shutdowns are carefully managed by increasing product inventory ahead of time, or through exchange agreements with other refiners. Refiners also carefully manage their production to meet demand peaks and valleys throughout the year, to formulate the different fuels that are required in summer and winter, and to meet the needs of Canada’s vast geography and different climatic conditions. 

When unforeseen circumstances or events happen, refiners have well established and well tested contingency plans that minimize and mitigate impacts on consumers, and ensure that fuel is always available to meet the needs of emergency services.

Canadian Fuels members have a strong commitment to, and positive record for, refinery reliability, supply chain integrity and product availability.

Retail supply disruptions can occur but are most often short term and localized. Widespread and long-term disruptions are rare, and seldom the direct result of a lack of product. The most common causes are unforeseen conditions beyond our control, such as major storms or electrical power failures.

Fuel supply disruptions can impede getting product to customers when unexpected logistical problems occur within the transportation supply chain. Designed, built and continually upgraded over more than a century, the fuel supply chain includes refineries, distribution terminals and a complex network of pipelines, railways, ships and trucks. Several modes of transportation are usually required to bring gasoline and diesel from refineries to product terminals located near major markets. From there, fuels are trucked to retail outlets.

Canada is fortunate to be home to some of the world’s largest crude oil reserves, including the oil sands and offshore production. It’s sensible to wonder why we refine only a portion of that crude and export the rest. Why not refine it all? The answer is complicated only because there are a number of factors to consider.

Over the past 40 years, some of Canada’s smaller, older refineries have closed. Other refineries have been modernized to increase efficiencies, expand production capacity and compete in a highly competitive continental and global marketplace for refined products. The result is that we currently have enough refinery capacity to meet domestic needs and have some left over for export to other countries.

So what about demand in the future?

Future demand for petroleum products in Canada and most OECD countries is expected to be flat or declining. The reason: vehicles are becoming more fuel-efficient, alternative fuels are increasingly popular, demographics are changing, and public policies are emerging to reduce GHG emissions from transportation.

This changing demand profile means that refiners with growth ambitions must look globally for new markets for transportation fuel, namely India, China and the Middle East. At the same time, these markets are responding rapidly to increasing domestic and regional demand by building their own refineries — some of them among the largest in the world. Canadian refiners would have to be extremely competitive to penetrate these markets.

Can we overcome the obstacles?

Perhaps. Geography is a major challenge. We are at a greater distance from new markets than most of our competitors, which means we would have to produce and transport the refined products at a lower price. Much of the feedstock—the crude on which a refinery relies—is landlocked in Western Canada.

The world’s most efficient and profitable refining operations are located on tidewater —in the Gulf of Mexico, for example.

Although petroleum is expected to remain a key transportation fuel for decades, an investment of $15 billion comes with significant risks. Which is why there is no rush of investors, private or public. Investors trust market forces to dictate the wisdom of new refineries everywhere, including Canada.

Where is the best value?

Some say that exporting crude without processing it into finished products foregoes the opportunity to add significant value. The assumption is that the later stages of processing create better terms of trade. But the stats disagree. In Canada, the value of extraction and the services that support it far exceed refining.

The truth is that we’ve struck a healthy balance with Canada’s refining system. We meet our needs while having enough refined product to protect our supply and remain a net exporter. 

While firmly committed to supplying Canada’s transportation fuel needs, Canadian Fuels Association members are also working to decarbonize the sector. Since 2000, our members have invested over $15 billion to improve the environmental performance of their refineries and the fuels they produce, including $5 billion to significantly reduce sulphur in gasoline and diesel.