Werner’s blog: Why the Trans Mountain Pipeline Expansion will make gasoline more expensive in Vancouver

While the expansion of the Trans Mountain Pipeline will mean a significant boost in petroleum transport capacity, the result will actually increase gasoline prices for end-users in the Vancouver area, argues UBC Sauder Associate Professor Werner Antweiler. He lays out the reasoning for this in his latest blog post.

The Trans Mountain Pipeline Expansion (TMX) is expected to come online on May 1, 2024. Originally projected to cost $7.4 billion, it is now expected to cost $30.9 billion. The federal government of Canada purchased the pipeline from Kinder Morgan for $4.5 billion in 2018 and formed the Trans Mountain Corporation (TMC). The expansion will boost the transportation capacity from 300,000 to 890,000 barrels per day (13.1 to 38.8 million cubic metres per year). Virtually all of the additional capacity of the TMX pipeline will be used to increase exports through the upgraded Westridge Terminal in Burnaby.

The cost overruns will affect the tolls that are charged for transporting petroleum products from Edmonton to Burnaby and the Westridge Terminal. Motorists in Vancouver will feel the pain as it will drive up wholesale fuel prices.

Trans Mountain Pipeline ULC, the company that operates the pipeline, applies to the Canada Energy Regulator to set the tolls for transporting oil products through its pipeline. The new Interim Tariff No. 117 comes into effect on May 1 and replaces Tariff No. 113. The new tariff does not differentiate between transportation through the new and old pipes. In the old tariff, transporting oil from Edmonton to Burnaby was charged $20.919 per cubic metre. The new tariff is $78.9275 per cubic metre. That is a whopping 277 per cent increase. Since one cubic metre of petroleum makes at most 1,000 litres of gasoline (there are refining losses), the transportation cost will go up from about 2.1 cents per litre to 7.9 cents per litre. Expect gasoline prices to respond with an increase of about six cents per litre (including the effect from the GST).

There is little doubt that oil companies operating in B.C. will pass on the higher Trans Mountain pipeline tolls through higher wholesale prices to final consumers of gasoline and diesel. Motorists in B.C. will thus be paying for a share of Alberta's access to tidewater—and new export opportunities for their oil. It is safe to say that the extra cost that is hitting B.C. motorists will not be popular here. For the average motorists who purchases about 1,080 litres of gasoline per year, the TMX opening will impose an extra burden of $65 per year. Even more reason to think about switching to electric vehicles.

British Columbia consumes about 4.7 billion litres of gasoline per year, most of which comes from Alberta. B.C.'s two refineries can produce about 3.7 billion litres per year, all with feedstock from Alberta. Thus, on an annualized basis, the higher TMX tolls will cost British Columbian an estimated $222 million per year (including tax revenue sent to Ottawa).