Gas Prices in Nova Scotia Canada

Nova Scotia gas prices not falling in line with U.S. oil prices

The price of regular gasoline fell again this week to $1.11 in Halifax, down 22 cents from a year ago when a litre sold for $1.33, a drop of 16.5 per cent.

Earlier this week, the price of a barrel of Brent Crude oil — which is the standard gasoline prices are pegged to in this region — dropped to $49.52, down from $104.61 this time last year. Do the math and that's a drop of almost 53 per cent.

So, why aren't consumers getting a bigger break when filling up at the pumps?

They should be, says Dan McTeague, a former Member of Parliament for 18 years who served as the Liberal critic for both the consumer and veterans affairs departments. McTeague is now a senior petroleum analyst with gasbuddy.com, a website that helps consumers find the cheapest prices for fuel.

He says there are a number of factors that explain why gasoline prices in Canada aren't falling as fast as the price of oil, or even as fast as prices have come down in the United States.

McTeague attributes a shortage of supply in the U.S. as accounting for 30 per cent of the problem, while the weak Canadian dollar is responsible for 50 per cent.

"The rest is simply what I refer to as 'mystery cents, ' where refiners are able to pass on higher prices without much reason, " said McTeague.

Exchange rate woes

McTeague says when you factor the currency exchange rate into what it costs refiners to buy crude oil in U.S. dollars, the net drop in the price of a litre of gasoline is actually 31 cents compared to last August. That's a much bigger break than the 22 cents a litre Nova Scotians are seeing.

"We are looking at two very different commodities with very different fundamentals, " said McTeague.

He says oil is being over-produced in North America and globally, which has led prices to drop dramatically and has impacted the Canadian dollar.

"Our number one export has been oil and as it drops in value, the Canadian loonie is attached at the hip and has seen a significant devaluation. That has an impact on all commodities, including gasoline, " said McTeague.

He says prices at the pumps became "unhitched" from crude oil prices last February after North American refineries were unable to produce enough gasoline to meet demand.

"More importantly, as oil and gasoline prices did drop in the U.S., Canadians were denied the benefit because our currency also went down, our purchasing power was diminished, " said McTeague. "As a result we probably lost about 12 cents on every litre of gasoline in terms of savings."

What happens in the U.S. impacts Canada

McTeague says another factor keeping gasoline prices out-of-step with falling oil prices is that Canadians import gasoline from the U.S. He says what happens in the U.S. market matters a lot to Canadians.

"The other aspect of the differential is wholesale prices of gasoline being driven up by a shortage of supply and at the same time higher demand in the United States, " he said. "It means we've lost another 10 or 11 cents a litre. We found out there were significant supply disruptions and production issues with gasoline, labour strikes, colder weather that froze a lot of pipelines in the U.S, that affected us in the northeast. And as lower prices gripped the U.S., consumers there went back to their vehicles in droves — so demand is up and supply is down."

'Mystery cents' explained

Last but not least, McTeague agrees with other analysts who suspect multinational companies that produce oil as well as sell it are charging customers more at the pumps to make up for lower profits from Alberta and Newfoundland crude.
This is what he earlier referred to as mystery cents.

McTeague says there is a need for more disclosure as to why prices remain high here, despite tumbling in the U.S. in recent weeks.

"We have not seen those savings passed on to consumers, " he said.

The former federal MP says all it would take is the political will to ensure oil companies in Canada follow the same reporting rules as they already do in the U.S.

"What we are dealing with is a significant lack of transparency about what gasoline is being produced in a timely way and what is being consumed in Canada, " said McTeague.

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