Recent jump in gas prices 'long overdue,' says market expert

If you've enjoyed unusually low gas prices this month, but noticed an increase in recent days, don't look to the federal carbon tax as causation yet — a petroleum market expert says the hike is long overdue for Calgary's market.

GasBuddy shows the average retail price of petroleum in Calgary spiking over the last three days, and passing 97.8 cents per litre, after hovering between 93 and 93.8 cents since approximately Dec. 18.

The price increase comes shortly before the implementation of the federal carbon tax, which is projected to increase costs at the pump for Albertans by about 4.4 cents per litre for gasoline.

But according to Michael Ervin, senior vice president of the Kent Group, gas prices are dynamic.

When they fluctuate, it's typically a reflection of a number of factors, and Ervin says the recent increase is in part because of wholesale prices.

"Wholesale prices [are] going up, and they do fluctuate on a day-to-day basis — although pump prices don't necessarily change on a day-to-day-basis," Ervin said. 

"Retailers [are] trying to recapture the increase in the wholesale price, but more than that ... some retailers [are] trying to raise their price, in order to restore what has been a very unusually low markup on the retail price of gasoline."

That "very unusually low markup" Calgarians have experienced, Ervin says, is unique.

Current rates not tenable, expert says

According to the Canada Energy Regulator (CER), the retail price of gas is ultimately determined by four factors: the price of crude oil, the refining margin, the marketing margin and, finally, taxes.

The latter, according to Ervin, is what keeps Calgary's gas prices far lower than the national average. 

While the rest of Canada has markups of around 10 to 12 cents per litre, Ervin says Calgary's markups are around three cents.

GasBuddy reflects a large difference, too, with the Canada average of gas prices hovering near $1.12 a litre throughout December. 

"Calgarians enjoy some of the lowest prices in the country, as a result of pretty low taxes on the gasoline itself," Ervin said.

The upshot is the increase in gas prices across the city is inevitable, Ervin says, because the current rates are not tenable.

"When you see that retailers are trying to make a few dollars by increasing the price, ultimately they're trying to basically keep themselves in business," Ervin said. "Because the markup, right now, is not sustainable."

Another increase still on the horizon

Though the price of gasoline has increased ahead of the carbon tax, it isn't finished going up, Ervin said. 

"When the carbon tax does come in on Jan. 1, you're likely to see another increase in the price, because that tax has to be passed along," Ervin said. 

"If it weren't ... then the markup would be lowered by the same amount as a tax. And again, that would put retailers in a position of not being able to sustain their operations."