-Different tax systems in Canada and U.S. account for differences in pump costs-

OSOYOOS TIMES-January 23, 2008-

By Chad IngramrnOsoyoos Times

With the price of oil at $100 a barrel, most British Columbians, along with most of their fellow Canadians, are paying well over $1 for a litre of gasoline.
Here in the Okanagan Valley, as in the rest of the country, it is a complicated combination of international and local factors that determines how much people pay at the pumps.
It's complicated, but not too complicated in that it's a commodity, said Graham White of Husky Energy. It's subject to the volatility of the world market.
Factors such as weather, war and the socio-economic climate in oil-producing countries play a huge role. The more difficult it becomes to extract or refine petroleum, the more gas will cost.
In fact, White said, even the perception of scarcity can cause prices to increase. He used hurricane Katrina as an example of how the fear that American oil refineries were damaged caused the price of gas to spike before the extent of the damage was even known.
It doesn't require a shortage, just the perception of a shortage, White said.
There are also three major transactions which are constantly taking place. The first is the purchase of crude oil by refineries from those who extract it. The second is the purchase of refined petroleum by gas companies and the third is the sale of that refined petroleum, or gasoline, to consumers.
At each of these turns, someone is seeking to make a profit.
While the local market is usually tied to the international value of petroleum, there is no rule that says it has to, White said. There are plenty of examples where the international price has been high but the local price has been low as vendors try to outdo one another.
And it would seem that here in Osoyoos, local market factors trump international ones when it comes to the price of gasoline.
We usually just match our competitors, said Gary Johal, owner of the Husky station on Hwy. 97, at Osoyoos' north end. Johal's station is an independent one, meaning that although he operates under the Husky logo, he is free to set his own gas prices.
Independent gas stations operate sort of like franchises.
We say employees of independent stations aren't employees of Husky, they're employees of the owner, White said.
Corporate stations are given direct instructions from a regional head office on what price they will charge for gas. The Mohawk station on Osoyoos' Main Street, which is owned by Husky, is one such corporate station, receiving its orders from an office in Kelowna.
White said about half of Husky stations are independent and half are corporate.
Johal said he will often look at what corporate stations are charging as a guide, but also keeps his eye on other independent stations such as the Shell service station across the highway.
(Our cost) depends on the (international) cost, said Shell Manager Ikay Deol, emphasizing the importance of turning a profit, even if it is usually just a few cents per litre. But it's more local (factors that drive the price.)
With Johal and Deol in business just across the street from one another, one might think constant price wars would be taking place.
However, this is not typically the case.
If we go down a cent, they will just go down a cent, Johal said. Instead, it seems that both stations typically stay fixed at whatever price the area's corporate stations are charging.
Last week that price was $1.099 per litre. Both Johal and Deol said prices will typically change once every two weeks or so.
The prices here in the Okanagan are relatively stable, Deol said.
Most of the gas sold in B.C. is made from petroleum extracted in Alberta and refined in Ontario or New Brunswick, where the majority of the country's refineries are located. While transportation costs do play a role in the cost of gas, White said international cost and local competition are larger factors in determining what a person pays at the pumps.
Just across the border in Oroville, Wash., the situation is similar, with independent stations looking to corporate ones to decide how much they will charge for gas.
Surjit Singh owns a 76 service station on Hwy. 97 South in downtown Oroville.
We just go with the market, Singh said. We just go locally, not internationally.
Just down the highway from Singh, Dale Rawley manages a corporate Shell station. Rawley gets his cost instructions from a regional office in Okanogan, Wash.
Last week Rawley's Shell station, Singh's 76 and the several other stations in Oroville were charging $3.299 per gallon of gasoline.
Anyone keen with conversions will know this equals approximately 89.7 cents per litre. With such a dramatic difference in price, it's no wonder that so many Osoyoosites head to Oroville to gas up.
But why this differential? Why is gas so much cheaper just across the border?
According to the Canadian Petroleum Products Institute, a federally funded body, the tax systems of the two countries largely account for this difference.
The organization's vice-president for Western Canada, Ted Stoner, said that while American gas consumers pay both a state and federal fuel tax, Canadian gas consumers pay two provincial and two federal taxes on their fuel.
Stoner produced stats from May of 2006 which showed 18 cents worth of taxes on an American litre of gas versus 34 cents on a Canadian litre.