Why gas prices are rising — and what actually controls the price
When you pull up to the pump, you’re not just paying for oil. You’re paying for a chain of costs that starts in the ground and ends at your local gas station.
Here’s how it works in plain language.
Oil sets the pressure
Crude oil is where everything starts.
Since late February:
- Oil has climbed from about $73 to $110 per barrel
- That’s an increase of about 51 per cent
This creates the underlying pressure for higher fuel prices.
Wholesale gasoline sets the pace
Oil has to be refined into gasoline before it reaches your vehicle.
That gasoline is traded as wholesale fuel, often referred to as RBOB.
Since late February:
- Wholesale gasoline has jumped from about $2.08 to $3.16 per gallon
- That’s an increase of about 52 per cent
This is the closest thing to a direct driver of pump prices.
From refinery to pump
Before reaching Lloydminster, fuel is:
- Blended
- Transported
- Stored
- Sold to local stations
Then retailers add a margin, and governments apply taxes.
What we’re seeing locally
- Prices at the pump for regular fuel have risen from about $1.19/L to $1.54/L
- That’s an increase of about 29 per cent
Prices are climbing, but still lagging behind global energy markets.
How much of your gas price is tax?
In Alberta:
- Federal fuel tax: 10¢/L
- Provincial fuel tax: 13¢/L
- GST: 5% (applied on top of everything, including the other taxes)
At $1.54/L:
- Total tax is about 30 cents per litre
- Roughly 20 per cent of the pump price
What if Alberta cut the gas tax?
If the province cut its fuel tax in half:
- Direct savings: 6.5¢/L
- GST reduction: about 0.3¢/L
Total impact:
- ≈ 7¢ per litre
That would bring:
- $1.50/l to about $1.43
- $2.00/l to about $1.93
Even a major tax cut would only move prices a few cents, meaning most of the cost is driven by global markets.
Why gas hasn’t risen as much as oil
Even though oil and wholesale gasoline are up more than 50 per cent:
- Taxes are fixed
- Some costs don’t change
- Prices take time to adjust
- Local margins can shift
Pump prices typically lag behind large market moves.
Why prices rise fast and fall slowly
Gas stations don’t usually price fuel based on what they paid for the fuel already in their tanks.
Instead, they price it based on what it will cost to replace the next load.
That means:
- When wholesale prices rise, stations often increase prices quickly — sometimes before new fuel arrives
- When prices fall, stations tend to lower prices more gradually as they sell through higher-cost inventory
This forward-looking pricing model is why drivers often see prices jump quickly but take longer to come back down.
What happens if oil keeps rising?
With oil currently around $110 per barrel and local gas near $1.54 per litre, further increases in crude could push prices higher at the pump.
Based on recent trends:
- At $130 oil, gas could move into the $1.64 to $1.74 range
- At $150 oil, gas could reach roughly $1.74 to $1.94
- At $170 oil, prices around $1.84 to $2.14 become possible
These estimates assume wholesale gasoline rises alongside crude, which is often the case during major market moves.
Why this isn’t exact
Fuel prices do not move in perfect lockstep with oil.
Actual pump prices will depend on:
- Wholesale gasoline markets
- Refining capacity and margins
- The Canadian dollar
- Local supply and demand
- Government policy
If wholesale gasoline rises faster than oil, prices could increase more quickly. If it lags, pump prices may not fully reflect crude increases.
The simple rule of thumb
For drivers:
When oil and wholesale gasoline both rise quickly, pump prices usually follow within days.
In practical terms:
Sustained increases in those markets can translate into roughly 2 to 5 cents per litre increases at the pump in the short term.
The bottom line
- Oil sets the direction
- Wholesale gasoline sets the pace
- Taxes are a smaller, fixed portion
- Prices are based on replacement cost, not past purchases
- Local prices follow shortly after
If global energy markets continue to climb, drivers in Lloydminster should expect more pressure at the pumps.
Read more: Lloydminster area helps drive $7M Crown oil and gas sale to close fiscal year
