Fuel Prices

Res #: 13-14A
Number: 13
Year: 2014
Midterm: No
Expired: Yes
Responses Received: No
Departments: Saskatchewan Ministry of Economy

WHEREAS the price of oil per barrel has not increased but the price of fuel has increased; and

WHEREAS grain prices have decreased causing a hardship to the agriculture industry;

BE IT RESOLVED that SARM lobby the Provincial Government to investigate the cause of the inflated fuel prices.

Response from Honourable Gordon S. Wyant, Minister of Justice and Attorney General

It is worth pointing out that Canada, like most other oil-producing countries, sells its crude oil and natural gas on the international market.  Total Canadian production of crude oil is roughly four per cent of the total world production.  Unlike the uranium and potash industries, Saskatchewan's oil and natural gas resources are not large enough to influence world or even local prices.

Oil prices are determined in international markets where crude oil futures contracts are traded.  About 76 per cent of Canada's total domestic crude oil production went to the export market in 2013 compared to 73 per cent a year earlier.  Since 2005, world crude oil prices have nearly doubled from $56 to $102 per barrel resulting in some significantly higher-base costs for all petroleum products.

While Saskatchewan has periodically considered regulating gasoline, experience in the five regulating provinces (Quebec and the Maritimes) indicates it may not achieve the desired results.  The evidence is that price regulation eliminates some of the rapid changes that consumers dislike but leads to higher prices.

With respect to diesel fuel, in the last 52 weeks, of the 60 cities surveyed, the average price of diesel in Canada, including taxes, was $1.35 /litre and in Saskatchewan it was $1.26/litre.  For the period ending March 25, 2014, the Canadian average price was $1.45/litre compared to $1.38/litre in Saskatchewan.

Diesel demand has spiked in recent years for a number of reasons.  Last year for example, there was a long farm harvesting season due to good fall weather.  There was also an increase in construction, including oil field construction in Saskatchewan and Alberta, coupled with production problems at three of the four major refineries in western Canada.  Economic growth in the transportation sector (trucks, trains and marine use) has also increased diesel fuel demand.  A colder than normal winter in 2013-2014 has resulted in greatly increased demand for all types of petroleum fuels.

Overall, the retail diesel market is less competitive than the gasoline market because there are fewer sellers and they are competing for lower volumes.  In fact, diesel fuel sales account for only 15 per cent of total sales volume compared to 85 per cent for gasoline.

With respect to gasoline, in 2013 the average price of unleaded gasoline in Canada, including taxes, was $1.66/litre — an increase of 42 cents per litre from the previous year.  In Saskatchewan, the average price was $1.20 — an increase of one cent per litre. For the period ending March 25, 2014 the average price in Canada was $1.30/litre against $1.19/litre in Saskatchewan.