FAQs

How does the price of oil affect the price of gas?

The cost of gasoline at the pump is made up of the associated production, transportation, and distribution costs plus taxes. The associated costs include the refiners’ costs of purchasing and processing the crude oil, the oil companies’ marketing and distribution costs, the retail stations’ costs, and then the taxes. The price of gas also includes profit margins, or sometimes even losses, for each of these various stakeholders.  The costs incurred by each vary and the percentages of the cost of gasoline attributed to each reflect this variation.

In Canada, the price at the pump is generally distributed among the stakeholders as:

40¢ crude, 7¢ refining, 5¢ sales, 32¢ tax  =   48% crude, 8% refining, 6% sales, 38% tax

Thus, as the cost of crude oil increases, other stakeholders must adjust there prices and the price at the pump will fluctuate depending on the balance of pricing between all of the various entities along the production and distribution chain. 

Crude oil prices can fluctuate globally or locally in response to world events or regional problems, such as a pipeline shutdown.  Refining costs may vary from region to region depending on the local costs of acquiring crude oil, local operating costs such as energy costs, and the regional regulations on gasoline content.  Within individual regions, the refining costs tend to remain relatively stable, fluctuating primarily with the cost of crude oil.  Distribution and retail costs are much more independent and subject to a much wider range of variables.  This portion of the cost of gasoline generally reflects the retailers gasoline costs, general operation costs, preferred business practices, location, and local competition.  Distribution costs may also be affected by gasoline price – increasing as the price of fuel increases.