Washington refineries spark jump in Victoria pump prices

Greater Victoria gas prices jumped up to $1.399 for a litre of regular fuel at many service stations on Tuesday after Washington refineries increased wholesale prices, said an analyst.

“Talk about an odd market,” said Dan McTeague, petroleum analyst for GasBuddy.com, an online price-tracking site.

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The capital region saw prices move up last week, only to fizzle right away, and then rise again.

It is possible that prices might move to the $1.40 range next week, McTeague said.

“But in earnest, we probably won’t see that until April,” when cheaper-to-make winter gasoline is switched to more costly summer fuel. April is also when a nationwide carbon tax comes into effect, he said.

Drivers in the capital region had a wide choice on Tuesday as the prices responded to a changing market. The lowest price in the region was at Costco in Langford, at $1.239, which traditionally comes in below competitors.

The average price in Greater Victoria was $1.36 on Tuesday, up from $1.34 on Monday. A week ago, it was $1.259.

And at this time a year ago, the average was $1.418.

Nanaimo prices also surged to $1.339 in some locations in the afternoon. The cost had been $1.169 at other Nanaimo locations earlier in the day.

Washington state refineries supply a good amount of the gasoline used on the Island. The refinery wholesale price has gone up in the past two weeks, McTeague said. “That is really what has instigated this increase.”

Costco’s own relationship with suppliers gives it a cost advantage over the competition, he said.

“The fact is that gasoline stations can not operate in an environment where they are selling gasoline for three cents less than what it is costing them to replace,” he said.

Retailers’ wholesale price — what they pay — plus taxes comes to $1.28, he said. If they sell at $1.259, they lose money.

Costco has a different retail model than service stations because it has other sources of revenue for its business, McTeague said. It is able to move large amount of volume for refiners. “When you move volume, you get some big discounts.”

A discount could be as much as five cents a litre, he said. “No one comes even close to that.” McTeague figures Costco pays $1.22 or $1.23 per litre, giving the company a significant advantage.

Prices are set at the Pacific Northwest market, centred in Portland, Oregon, which sells wholesale fuel from the four Washington State refineries into to Greater Victoria.

“We are really price-takers, not price-makers,” said McTeague.

As wholesale prices have crept up, “retailers here in Victoria and on the Island have been really reluctant to pass on those increases to a point where they are starting to lose money.”

It’s difficult to say what will happen in the next couple of weeks, McTeague said.

In the Pacific Northwest, “almost any issue can cause prices to rise dramatically. That’s because on the U.S. Pacific coast, there is a high-demand scenario that always plays out.”

As well, many refineries are carrying out seasonal maintenance which sees them transferring over to the type of gasoline sold in the summer, he said.

“Overall demand continues to be very robust in the United States.” It doesn’t matter if demand decreases in Canada, McTeague said. “The U.S. determines the price.”

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