Record high Metro gas prices as area refineries hit by cold weather: analyst

Even after refineries in the region bounce back from the deep freeze, expect the rising price of oil to push pump prices to a new normal of $1.85 a litre

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Metro Vancouver drivers balking at record-high gas prices of nearly $1.77 a litre don’t have much to look forward to, as one longtime analyst predicts $1.85 a litre will soon be the new normal.

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Area refineries have been struggling in the freezing weather and this is the main cause for the recent spike in gas prices, said Dan McTeague, president at Canadians for Affordable Energy, who runs the site Gaswizard.ca.

“The weather started to change after the 23rd of December,” said McTeague.

Calgary-based Parkland Corp.’s Burnaby refinery, which supplies about a third of the gas to the Lower Mainland and the Island, issued a notice about “unseasonably cold temperatures” hurting its operations a few days after that date.

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If freezing temperatures affect a refinery’s ability “to crack the molecules to make gasoline or diesel,” it has to go through a mechanical fail safe called flaring, and burn off whatever oil is in its system before shutting down to protect equipment, said McTeague.

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He added that operations have also been snagged by cold weather at a refinery run by Dallas-based HollyFrontier Corporation in Anacortes, Washington, that usually has capacity to refine 149,000 barrels of crude oil a day. Two storage terminals in Oregon, run by NuStar Energy and Kinder Morgan Inc., which ship throughout the area, have also had logistics problems due to the weather. As well, the Trans-Mountain pipeline from Alberta to Burnaby is also not yet 100 per cent back in action after November’s storm damage.

“So all of these things (are) happening at the same time,” said McTeague.

The impact of curtailed supply has been clear when looking at the local rack or wholesale gas price. On Dec. 22, it was US$2.06 a gallon and rose steadily to US$2.65 a gallon on Jan. 5. It’s now come down to about US$2.55, but “it went up 60 cents a gallon,” said McTeague.

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Rising world oil prices have also hit Metro Vancouver gas pump prices, but he estimates that impact to be only about five cents a litre.

The previous Metro Vancouver retail price record was set last July when gas prices hit 173.9 cents a litre.

“What you’ve seen here smashing through all-time record prices set back on July 1 had everything to do with several key players in the region coming down at the same time. That set prices on a tear.”

The cost of oil rose from US$71 to US$77.85 a barrel at the end of 2021, said McTeague. He calculated that about five cents of the increase in gas prices since the last week of December can be attributed to the cost of oil rising.

Metro Vancouver gas prices in late December were about $1.56 a litre. This weekend they briefly went over $1.76 per litre for an increase that is about 20 cents. If global oil prices account for about five of that 20 cents, the other 15 cents can be attributed to the local supply constraints, said McTeague.

But longer term, even as local area capacity returns to normal, McTeague and others expect global oil prices to head higher toward US$100 a barrel in 2022.

That general outlook, combined with taxes and a weaker Canadian dollar, means that, at the pump, Metro Vancouver drivers will be paying $1.85 a litre within a few weeks or months.

“A buck 85 is going to be a number you’re going to see a lot more often.”

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