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Frequently Asked Questions

Who sets gasoline prices?

Why do prices all seem to be the same?

Canada is an exporter of oil. Why do we have to pay world prices?

When crude oil prices change, how much should it affect gasoline prices?

Why are gasoline prices different in different areas?

Where does my gasoline dollar go?

How do Canadian prices compare to those in other countries?

Where can I go to complain about gasoline prices?

There is a sign on the gasoline pump that says the fuel is temperature is corrected to 15 C. What does this mean?


Who sets gasoline prices?
The five Atlantic provinces regulate to limit the ability of the oil companies to set gasoline prices.  They periodically set maximum and/or minimum prices. Even so, the companies have some flexibility to set prices within the regulated range.

Agents who sell on commission run some stations, including many of the larger ones.  At these stations, the oil supplier sets the price.  A majority of stations are run by dealers who buy their gasoline from their supplier and set their own price.


Why do prices all seem to be the same?

Prices within a given market area tend to be similar.  Usually prices are prominently displayed and visible from a long way off.  Consumers are price sensitive, so retailers cannot be significantly undersold by their competitors.  The fact of similar prices within a given area cannot be taken alone as evidence of collusion or price-fixing.


Canada is an exporter of oil.  Why do we have to pay world prices?

Oil is an internationally traded commodity.  Canadian producers can sell their oil wherever they wish.  Canadian refiners compete for their supplies with refiners elsewhere in the world.  As a result, a major disruption in supply, such as a hurricane on the U.S. Gulf Coast, influences Canadian prices even if  physical supply in Canada is not affected.


When crude oil prices change, how much should it affect gasoline prices?
Oil prices are generally quoted in U.S. dollars per barrel.  A barrel contains just under 159 litres of liquid so, if changes in oil prices are fully reflected in the gasoline price, then a change in the price of oil of $1 per barrel would result in a change of 0.63 US cents per litre.  This figure has to be adjusted to reflect the exchange rate. In addition, the result must be multiplied by 1.05 to reflect the GST.


Why are gasoline prices different in different areas?
Gasoline prices vary from place to place for many reasons.  Tax rates vary from one province to another and, in some cases, within provinces.  Some areas experience higher costs than others. Stations farther from the major terminals that supply them incur higher transportation costs.  Stations in large urban centres generally sell higher volumes so their cost per litre is lower.  In addition, such large stations often have more opportunity to sell other goods and services, and these additional revenues make it possible for their gasoline to be sold for less.


Where does my gasoline dollar go?

The biggest cost component in producing gasoline is the highly variable cost of crude oil. In July 2008, the cost briefly reached 93 cents per litre.  Six months later, this had dropped to 28 cents per litre.
Taxes are also a major factor.  The federal government charges an excise tax of 10 cents per litre as well as the 5% GST.  Provinces levy gasoline taxes averaging about 14 cents per litre.
Refining and marketing costs and margins vary considerably from place to place but average about 21 cents per litre.  Learn more about the breakdown in your area by visiting Natural Resources Canada’s Fuel Focus website.

How do Canadian prices compare to those in other countries?
Gasoline prices vary widely worldwide.  Some countries heavily subsidize gasoline. For example, in Venezuela, the price of gasoline is set at 12 cents a litre -- well below cost.  Iran regulates prices at similar levels even though the country must import gasoline because it lacks refining capacity.  Most countries either do not regulate gasoline prices or set them at levels which reflect actual costs.  In these countries, the major difference in prices reflects different tax levels.  The 'ex-tax' price is usually very similar in most such countries.  Prices in the United States are generally considerably lower than in Canada because of lower taxes. However, taxes in other developed countries are much higher and this is reflected in the price.  The International Energy Agency publishes statistics on end-user prices periodically.

Where can I go to complain about gasoline prices?
Gasoline markets in Canada are competitive and the sale of gasoline is regulated by the Competition Act.  If you believe that you have evidence of anti-competitive behaviour, you can write to the Competition Bureau at:
Competition Bureau
50 Victoria Street, 21st Floor
Gatineau, Quebec K1A 0C9
Toll-free: 1-800-348-5358
e-mail: compbureau@cb-bc.gc.ca
Website: www.competitionbureau.gc.ca.
There is also an on-line complaint form.
 

There is a sign on the gasoline pump that says the fuel is temperature is corrected to 15 C.  What does this mean?

Gasoline, like everything else, expands as it gets warmer and contracts as it gets colder.  Without temperature correction, a litre of gasoline on a warm day would contain less gasoline by weight than on a cold day.  Gasoline is sold by volume but what you are actually paying for is the energy to make your car go.  Temperature correction ensures that, regardless of temperature, you receive the same amount of energy for your purchase although the volume may differ. Measurement Canada, an agency of Industry Canada, regulates measurement of gasoline at the pump. Click here for information about Measurement Canada's complaints process.

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