Q&A: Prices at the pump will rise because of Trans Mountain pipeline expansion

Gas prices around the Lower Mainland recently spiked to more than $1.50 a litre and a well-known economist says this is just the beginning.

Robyn Allan, an independent economist and former president of ICBC, argues prices will go even higher with the completion of Kinder Morgan's Trans Mountain pipeline expansion. 

She explained why to Stephen Quinn, host of CBC's The Early Edition.

How would increasing the capacity for petroleum products from Alberta to the Lower Mainland increase prices at the pumps?

We have to understand the purpose of the new pipeline: to ship heavy oil — diluted bitumen — to the Westridge dock to be loaded on oil tankers and, according to Kinder Morgan, go to Asia.

B.C. has no use for heavy oil.

The light crude oil and refined products southern B.C. needs are delivered on an existing pipeline.  

If the expansion goes ahead, toll rates on the existing line will more than double.

Right now, it costs about $2.50 a barrel to get gasoline to the Lower Mainland market and after the expansion, to help pay for the expansion that doesn't serve our market, it will go up to about $5.90 a barrel.

That equates to about two cents per litre increase at the pumps. I've calculated that above $100 million a year will be siphoned away from our economy.

How do you know toll rates are going to double?

The National Energy Board has a toll rate hearing for any major pipeline like this.

That hearing was held back around 2012 and all that data is on the NEB site.

Do we know that Kinder Morgan won't be carrying more than diluted bitumen through the new pipeline capacity? Earlier this week, we talked about how they can send different batches of different of products down any pipeline.

That's not what they told the National Energy Board. They told the board they were going to ship diluted bitumen, heavy oil, to the dock for export.

The intention of this project is not to increase petroleum product supply.

We get sufficient supply right now. This whole idea that somehow there is a scarcity of supply right now or historically in the last couple years is without merit.

In fact, what Port Metro Vancouver's statistics tell us is that B.C. is a net exporter of gasoline to the U.S.

The prices we see right now, we've been told is because of renovations or refurbishment at the refinery and that's having an impact on supply of the refined product — gasoline. Is that not the case here?

No, that is not the case. There is no scarcity of supply and there is no bottleneck on the current system.

Parkland refinery shut down for planned maintenance.

Planning for this event started in 2013. The company says that it built up its stored volume of fuel in advance of the shutdown and it also entered into deals with others to ensure a consistent source of supply.

We are being fed a story that is not consistent with the facts.  

Is this just profit-taking on the part of the oil companies?

Absolutely.

What we've got here is a classic situation of predatory or inappropriate pricing because the companies know what the markets here will bear.

We are often charged more than costs and a normal return on profit and transportation would suggest.

Consumers have to take action. We have to vote with our feet.

This interview aired on The Early Edition on March 22 and has been edited for clarity and structure. To hear the complete interview, click on the audio below.