Globeandmail.com

Running on empty: Foreign shipments of fuel to B.C. would ease pain of Alberta cuts to energy exports
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By DAVID EBNER
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Wednesday, April 18, 2018 – Print Edition, Page B1


VANCOUVER -- Any move by Alberta to restrict the supply of oil and gasoline to British Columbia in the fight over the Trans Mountain pipeline expansion would have a limited effect on the price of gas in the province as supply would arrive from suppliers elsewhere in the world, one industry expert says.

In the B.C. Legislature on Tuesday, opposition Liberal MLA Jas Johal said "B.C.'s economy would come to a standstill" and cited analysts' predictions that prices would jump $2 a litre.

However, Michael Ervin, an analyst with the Kent Group, which tracks the petroleum market, said predictions of a gasoline apocalypse are overstated.

Mr. Ervin said an increase of about 10 cents a litre was a likelier outcome. If prices spiked by much more, gasoline supplies from the U.S. Pacific Northwest, California and overseas in Asia would be drawn to B.C. The higher the differential between B.C. and elsewhere, the more attractive it would become to overcome costs by bringing it in via rail, truck or ship.

"There are a lot of moving pieces that would come into play," Mr. Ervin said.

Jock Finlayson, economist for the Business Council of British Columbia, said in an e-mail on Tuesday that a spike in gasoline prices would slightly dampen consumer spending and raise operating costs for many businesses, but this would not trigger a sharp economic downturn on its own.

The Alberta government on Monday introduced legislation that would allow it to restrict or cut off shipments of oil and products such as gasoline out of the province. It was a political move to put more pressure on B.C., which opposes the pipeline expansion and where the price of gas is already high.

On Tuesday in the B.C. legislature, Attorney-General David Eby called the Alberta legislation "unconstitutional and illegal," and said Alberta was "very unlikely" to make such a move. He added that B.C. would fight Alberta in court if it came to blows.

The Vancouver region is already home to Canada's most expensive gasoline, and the prospect of even higher prices would cut into the provincial economy, according to industry leaders.

Greg D'Avignon, CEO of the B.C. business council, said the economies of Alberta and B.C. are more integrated than any other two provinces, and the cost of Alberta reducing the flow of energy to B.C. could reverberate widely.

"There's always unintended consequences when you have a trade war," Mr. D'Avignon said of the impact that could be felt in both B.C. and Alberta. "There's the increased price of goods, everything from produce to clothing over the course of time."

The GDP impact of higher prices is hard to exactly quantify, Mr. D'Avignon said, and the business council has not done the analysis yet. But Mr. D'Avignon said an array of negative factors could include a decline in the Canadian dollar as foreign investors sidestep Canada because of the political fights and perceived instability. "It just doesn't make a lot of sense," Mr. D'Avignon said of the escalating tensions between B.C. and Alberta.

B.C. depends on Alberta for gasoline, most of which comes on the Trans Mountain pipeline, according to the National Energy Board. The pipeline is able to deliver raw and refined products, gasoline, diesel and jet fuel, along with oil and diluted bitumen. B.C. produces some gasoline in two refineries, one in Burnaby at the pipeline terminus and a small facility in Prince George. Less than 10 per cent of B.C.'s gasoline currently arrives by ship or barge from the Pacific Northwest of the United States.

"The Kinder Morgan pipeline is not an inexhaustible supply," Mr. Ervin said.

Regular gasoline in Vancouver is currently $1.55 a litre, the highest in Canada, according to the Kent Group. The Canadian average is $1.35, which is also the price in Toronto. In Calgary, it is $1.29. A year ago, the situation was the same, with prices somewhat lower, but Vancouverites still paying the most of anywhere in Canada.

One reason is taxes, which are about 10 cents a litre more in Vancouver than on average in Canada - accounting for half the price gap between Vancouver and the national average. A second factor is the already tight supply situation on the Trans Mountain pipeline, which has no room to move additional gasoline, Mr. Ervin said.

Karl Gillies, president of Surrey-based Diamond Delivery, which delivers an array of goods in a fleet of more than 180 vehicles, said higher trucking costs would hurt consumers, dampen spending and radiate negatively through the economy.

"We supply everything to anybody," Mr. Gillies said. "We deal with thousands of customers. Without fuel, the trucks don't move."

Pipeline politics are frustrating Mr. Gillies, given that Kinder Morgan Canada Ltd. has the federal green light to expand Trans Mountain. "It's already approved, is what I understand."

One vulnerable group of customers that have been working for a more secure supply link is a consortium of 25 airlines that use the Vancouver International Airport.

About 40 per cent of the jet fuel the airlines use comes from Parkland Fuel Corp. refinery in Burnaby and the rest arrives from the Cherry Point Refinery in Washington State, by barge and tanker truck. The consortium's Vancouver Airport Fuel Facilities Corp. is building a new marine terminal on the Fraser River that will be able to take jet fuel off tankers from Asia. A 15-kilometre pipeline would connect it with the airport.

Associated Graphic

The Vancouver region is home to Canada's most expensive gasoline and the prospect of even higher prices would cut into the provincial economy, industry leaders say.

RAFAL GERSZAK/THE GLOBE AND MAIL


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