Gas prices increased sharply this spring but gas retailers didn’t take advantage of the “market volatility” to set higher gas prices and earn bigger margins, according to preliminary study by British Columbia Utilities Commission (BCUC).
Sharp increase in gas prices this February and March was attributed to supply chain issues that stemmed from Russian invasion of Ukraine.
The BCUC was tasked to monitor pricing behaviours to examine whether retailers were unfairly profiting from the period when market conditions were impacted by the conflict in eastern Europe. While retail fuel prices increased significantly in late February 2022, the BCUC’s preliminary findings show that retailers were not taking advantage of the market volatility to set higher prices and earn higher margins than would be expected under normal conditions.
Instead, it cost fuel retailers more to purchase fuel from wholesalers, so the increased revenues for retailers were largely offset by those higher costs, the BCUC says. For its Fuel Data Exploration Project, the BCUC selected a sample of retail gas stations across the province and required them to submit their fuel volume sales and fuel margins for February and March 2021, and February and March 2022.
The BCUC’s preliminary results show that retail margins did increase between 2021 and 2022. However, 2021 was a lower-than-average year for volumes of fuel sold, likely due to travel restrictions with the COVID-19 pandemic, the report says. As a result, many retailers reported losses during 2021. At the beginning of 2022, demand returned to normal, therefore, retailer margins increased to near-normal, pre-pandemic levels, the study says.
The BCUC will now examine the effect that the wholesale market may be having on fuel prices in BC. Work is currently underway to develop a greater understanding of wholesale prices in BC and how retail prices are set in select cities. As the Administrator of British Columbia’s Fuel Price Transparency Act (FPT Act), the BCUC is responsible for collecting and publishing information about gasoline and diesel fuel activities in BC.