The price you pay for each litre of gasoline is made up of several components. Once again, changes can affect one of the components and alter the overall price.
Price of a barrel of crude oil
The price of crude oil is generally set by the world market based on supply and demand. As a result, when demand increases and stocks decrease, the price of crude oil increases, but many other factors can affect the price of crude oil, which is the main component in the gasoline pump price.
Theoretically, this is what it costs the oil company to produce all of the various finished products from crude oil: gasoline, kerosene, diesel, fuel oil, etc. In fact, the refining margin, which covers these production costs and which includes a profit for refiners, represents the difference between the price of crude oil and the rack price. This margin is the same for the various administrative regions in Quebec, but it varies considerably throughout the year.
Although it is not theoretically a component of the price of gasoline, the rack price, which represents the amount paid by the customers of a bulk gasoline depot and is based on the benchmark price at the Port of New York, is the source of the pump price. In fact, it is the basis of the calculation of the daily acquisition cost indicator for petroleum products and the minimum price estimated by the Régie de l’énergie du Québec.
The retail margin is the distribution margin that represents the difference between the pump price and the acquisition cost. It includes the operating expenses of a service station as well as the retailer’s profit. It varies from one region to another in Quebec.
The transportation cost is the estimated cost of transporting gasoline from the rack to the service station. It is a set amount that varies from one city to another. As a result, customers of service stations that are located far from the depots must in theory pay higher transportation costs. However, in order to avoid an imbalance between the various regions, the Government of Quebec has lowered the fuel tax it collects.
Unlike the factors that are difficult to control and that characterize the extensive oil market, the various taxes that are added to every litre of gasoline that you purchase could be re-examined. To do so, our elected officials would simply have to take the necessary steps in order to take the pressure off taxpaying motorists. It is this factor that is almost solely responsible for the significant price differences between Quebec and the U.S. and even the other provinces. After the price of crude oil, taxes represent the second main component of the pump price.
In Canada, all gasoline sales are subject to GST (the Goods and Services Tax) and the excise tax, but the situation varies from one province to another and even from one region to another.