Vancouver’s surging gas prices could be eased by Trans Mountain pipeline expansion, Trudeau says - The Globe and Mail

Sharon Nadeem

VANCOUVER

Published 4 hours ago

Updated April 30, 2018Open this photo in gallery

Prime Minister Justin Trudeau speaks in Vancouver on Monday.

BEN NELMS/Reuters

Prime Minister Justin Trudeau pointed to the Vancouver region's record-high gasoline prices Monday as he defended the Trans Mountain pipeline expansion.

Mr. Trudeau was in Vancouver for an announcement related to a new Amazon office at a time when gas prices exceeded $1.60 per litre in the region – the highest prices of any major city in North America.

"I know that part of the challenge that folks across the Lower Mainland and B.C. are facing right now is related to the fact that we are connected so closely to the U.S. market and to what happens in the United States," Mr. Trudeau said.

He suggested the expanded pipeline could ease those pressures by opening up Canada's oil to new markets while reducing dependency on the United States.

"Canada currently ships oil only to the United States and loses about $15-billion annually by not exporting it to other markets through an expanded pipeline."

The federal government, which approved Kinder Morgan's pipeline expansion in 2016, has argued the project is in the national interest to open up Canadian oil to overseas markets. Mr. Trudeau's visit to Vancouver comes amid an increasingly tense fight between B.C., Alberta and Ottawa over the fate of the project.

Kinder Morgan has shelved all but essential spending on the project ahead of a May 31 deadline to decide whether to proceed. The federal and Alberta governments have promised legislative and financial support to save it, while B.C. has launched a court case to assert its jurisdiction.

Alberta Premier Rachel Notley has also said expanding shipments to B.C. could ease gas prices in the province – and warned that blocking the pipeline would only make the situation worse.

Experts offered differing opinions about how much gas prices are linked to the pipeline debate.

Michael Ervin, senior vice-president at Kent Group, an analytical company that focuses on the petroleum industry, said the prices are driven by several factors including constrained supply and a weak Canadian dollar.

Prices normally increase during the spring as refineries go under maintenance to meet the increased demand for gas during the summer driving season, he said.

But this year has been different, he added, with the United States drastically increasing the amount of refined fuel being exported to Mexico and South America, creating a crunch in supply for Canada. In addition, the weak Canadian dollar means that Canadians are paying 15 cents more at the pumps than their U.S. counterparts.

While the majority of the oil that would be pumped through the proposed pipeline is destined for export, some of it would be for domestic consumption. Mr. Ervin said the new pipeline would allow for gasoline to flow into B.C. markets, moderating fuel prices.

"The existing Kinder Morgan pipeline simply cannot put any more into it than what is already going through it," he said.

Mr. Ervin said the exports from the pipeline would improve Canada's balance of trade and bring the dollar closer to the U.S. dollar.

Blake Shaffer, an economist at the University of Calgary, disagreed. He stressed that the current rising price isn't just a B.C. problem, but it is increasing in Alberta and Saskatchewan as well.

"The reality is nothing to do with the pipeline. This is just normal operations," he said, referring to the annual spring maintenance as the driver of the high prices. What is unusual though is the coincidence of three refineries – two in Alberta and one in Burnaby, B.C. – going under maintenance around the same time.

"It's a supply issue, not a transportation issue right now," Mr. Shaffer said.

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