Gasoline Prices Are Going Up Again

Gasoline prices are on the rise in North America as a result of rising demand combined with more restrictive supply.  An aspect of tightening supply comes as a result of more "cooperative behavior" between major suppliers Russia and Saudi Arabia which was recently highlighted in a report on NPR.  Vancouver made the news with the highest prices on the continent hitting $1.62 a liter on Monday.  Along with refinery issues in Washington State which supplies a portion of Vancouver's gasoline, part of the high price in Vancouver also is a function of taxes in that Vancouver has very high taxes on motor fuel and a new carbon tax came into effect this month.  

While prices in Canada generally have headed up over time, there is a substantial range between the highest and lowest prices.  The accompanying figure plots the monthly maximum and minimum price of unleaded gasoline at self service stations for 18 major centers as compiled by Statistics Canada over the period January 1990 to March 2018. The cities are:St. John's, Winnipeg, Regina,Saskatoon, Edmonton, Calgary, Vancouver, Victoria, Whitehorse, Yellowknife, Charlottetown, Halifax, Saint John, Quebec, Montreal, Ottawa-Gatineau, Toronto and Thunder Bay.  Needless to say, the trend for gasoline prices over time is upwards (Figure 1).

What is also of interest is what appears to be a growing gap between the trend lines over time.  For example, if you go back to January of 1990, the price per liter of unleaded gas ranged from a low of 47.9 cents in Calgary to a high of 58.9 cents in Yellowknife -  a gap of 11.1 cents.  In March of 2018, the price ranged from a high of 151.4 cents in Vancouver to a low of 106.9 cents in  - a gap of 44.5 cents.  Indeed, if one plots the gap between the highest and lowest prices, one finds that it has grown over time as shown below (Figure 2).  This of course suggests that over time there has been increased dispersion of gasoline prices across cities and regions in Canada.  

However, one needs to standardize for the mean and if one takes the standard deviation of these gasoline prices by month and divides by the average, one gets a measure of dispersion known as the coefficient of variation and it tells a slightly different story (Figure 3).  The period from 1990 to about 2009 was one of a declining coefficient of variation - that is prices across these cities were actually becoming less dispersed.  However, since 2008, the coefficient of variation has been rising suggesting greater dispersion.  The overall linear trend from 1990 to 2018 however shows a declining coefficient of variation.

So, the long-term trend for gasoline prices in Canada is that they are on the way up.  The range in prices between highest and lowest in cents per liter is also growing with the gap across major cities as much as 45 cents per liter.  However, in terms of dispersion as measured by a coefficient of variation, the overall long-term trend since 1990 is for a declining coefficient of variation - that is less dispersion.  However, there are two periods - declining dispersion from 1990 to 2008 and then a rebound towards more dispersion of prices since 2008 to the present.



As a final bonus. here is a plot of Thunder Bay's monthly unleaded gasoline prices since 1990 compared to the 18 city median over the same period (Figure 4). Thunder Bay's prices are pretty close to the  median but since 2008 have been more often than not above the median.  In March of 2017, the average price in Thunder Bay was 110.7 cents per liter compared to the 18 city median of 104.8 cents.  In March of 2018, the monthly price in Thunder Bay was 123.6 cents per liter compared to a median of 121.8 cents.  Anyway, above the median or not, it looks like prices are going up.  Thunder Bay has seen a year over year increase of nearly 12 percent.  The increase for the 18 cities in this analysis over the same period in the median price was 16 percent and for the average monthly price it was 13 percent. So to date, we have been lagging a bit when it comes to price increases.