Werner's Blog — Opinion, Analysis, Commentary
The Trans Mountain Pipeline Expansion (TMX) will make gasoline more expensive in Vancouver

The Transmountain 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 meters per year). 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.

‘Opening of the expanded Trans Mountain pipeline in May 2024 increases gasoline prices in Vancouver by 6 ¢/L’

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 meter. The new tariff is $78.9275 per cubic meter. That is a whopping 277% increase. Since one cubic meter of petroleum makes at most 1,000 liters of gasoline (there are refining losses), the transportation cost will go up from about 2.1 cents per liter to 7.9 cents per liter. Expect gasoline prices to respond with an increase of about six cents per liter (including the effect from the GST).

Alberta's oil production has nearly doubled between 2010 and 2022, from about 2 million barrels per day (bpd) to 4 million bpd in 2022. Out of Canada's total production of 4.8 million bpd in 2022, 3.7 million bpd (77%) is shipped to the United States. Virtually all of the additional capacity of the TMX pipeline will be used to increase exports through the upgraded Westridge Terminal in Burnaby.

There is little doubt that oil companies operating in BC will pass on the higher Trans Mountain pipeline tolls through higher wholesale prices to final consumers of gasoline and diesel. Motorists in BC 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 BC motorists will not be popular here. For the average motorists who purchases about 1,080 liters 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 liters of gasoline per year, most of which comes from Alberta. BC'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).

Posted on Thursday, April 25, 2024 at 15:00 — #Energy | #BC
© 2024  Prof. Werner Antweiler, University of British Columbia.
[Sauder School of Business] [The University of British Columbia]