Welcome to a new series I’m starting - this is the full text of the posts I’ve been crafting on instagram because I know some people would rather read the things. As a disclaimer, I have a political science degree but am by no means an expert on the things that I’m breaking down. What I do have is a passion for explaining complicated things in simple ways. Now, more than ever, I think it’s really important. If you have something you specifically want me to cover, please message me on instagram (linked at the bottom).

Canadian gas prices were already incredibly high before a single shot was fired in Ukraine, mainly because the world economy is just now waking up from two years of COVID lockdowns, and is burning way more oil as a consequence (think – most offices ending remote work means more commuting, less restrictions mean more travel, the cruise industry is back etc).

The gap is bigger because much of the world’s energy sectors were cut back during COVID restrictions and aren’t quite as easy to flip and switch and start working again the way that say an office can. This is especially obvious in US fracking production – investors are hesitant to pour money in the way they were in 2019 because US shale oil absolutely tanked (lol no pun intended) in 2020 and they are still gun-shy – which means that ramping production back up has not been a priority. In addition, quick depletion rates of shale wells that were relatively cheap in terms of extraction are disappearing which means higher-cost deposits (oil that is harder to extract becomes significantly more expensive). Finally, supply chain issues and labour shortages are deeply impacting every industry right now – deploying a rig in the field might have taken a few weeks before, now it could take up to four months.

Canadian oil production isn’t that limber either. Extracting oil from sand in the middle of northern Alberta is expensive and takes a long time to get going (they are likely to make a killing when they do, but it’s not a speedy process – think they can’t just stick a pumpjack in the ground like in the cartoons). The OPEC nations are slowly ramping up production, but not nearly enough to bring prices back to normal levels (side note – if they did it could certainly mean a cut in their profits in this climate so they have no incentive to).

I know it is REALLY tempting to find a scapegoat and I see a TON of conversation online right now blaming Trudeau, blaming John Horgan, blaming taxes or the shift in some governemnts to more “clean” energy BUT I really caution buying in to that (notice it is often politicians who being with these talking points because it helps sow seeds of distrust and helps with their campaigns). Regardless of what Canada says or does on energy policy, our gasoline is guaranteed to skyrocket in price any time a major oil producer like Russia is out of the world market. Also, keep in mind that the “solution” to any impact would be at direct odds with climate change – in particular, looser environmental regulations and less emphasis on the cost of carbon pollution. In the middle of a climate crisis (where Canada and all other G7 nations have pledged NOT to increase emissions), that is really tricky. There is also conversation internationally for governments to ease sanctions countries like Venezuela and Iran so they could put more oil on the world market but does that risk “out of the frying pan into the fire” -ing us? It’s definitely a risk when these countries have strong histories of human rights abuses.

So, why is gas even more expensive in BC than anywhere else in Canada (and in the lower mainland even more so)? In short, it’s just harder to get gas to us. Where cities on the east coast (think: Toronto, Montreal) are plugged into a North American pipeline network connecting big and small refineries everywhere from Chicago to the Gulf Coast, here on the west coast we’re basically an island that’s largely isolated from the typical infrastructure used to fill up service stations with gas. One small pipeline from Alberta, one refinery in Burnaby, and whatever we can ship up from Washington means that it costs more to get gas here.

On a macro level, why are we seeing this even further impacted with what’s happening with Russia? Especially when we haven’t even imported ANY Canadian oil from Russia since 2019?? GOOD QUESTION and you might not like the answer…

Under normal circumstances, Russia is one of the world's largest oil producers. By removing much of that Russian oil from the world market overnight, refineries and other oil buyers are now forced to scramble for whatever's left — which means higher prices.

*Keep in mind, very little of Europe has sanctioned Russian oil as of right now simply because they are so dependent on it that it has the potential to put those countries into free-fall. Keep in mind also that China is unlikely to sanction Russia, partly because their stance thus far has been not to interfere, and partly because Russia is selling their oil at such a deep discount right now to try and move it and keep their economy afloat.*

The world essentially only has one oil price (when it comes to the numbers that companies care about). Oil is bought sold and shipped around the world through a global commodities market which means it almost doesn’t matter WHO gets Russian oil – lower supply affects global prices no matter what. And while they are happier to jack up prices regionally to cover extra taxes or harder delivery, those modifications will always just sit on top of whatever world oil price is. Oil is a very fickle commodity – where you are likely only just now seeing inflation on the cost of other goods that have actually cost more to make or procure for the last two years, world oil pricing can swing based on simply the “idea” of a change to supply or demand. It is much more volatile. In addition, there is a TON of uncertainty about buying Russian oil because of economic sanctions (will they even be able to close the deal with so many financial institutions restricting sales to and from Russia?) and due to the concerns of physical war (a war zone needless to say has some shipping concerns).

Basically, it all boils down to a really complicated answer of supply and demand. Because in a global economy, it’s almost never simple.