Oil prices are down, so why are you paying so much for gas?

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If you’re looking for a reprieve at the pumps in Yellowknife this holiday season, you might not be so lucky.

That’s according to Dan McTeague, senior petroleum analyst with GasBuddy.com.

On average, Canadians are paying 97.70 cents a litre this week. In Yellowknife, drivers are paying an additional 15 cents on top of that.

With crude prices plunging to under $35 US a barrel this week, some would be forgiven for thinking that gas prices should go down with them.

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But McTeague says the formula for determining the cost of gasoline isn’t that simple.

“People hear crude trade daily. They don’t hear that there’s another market called the refined gasoline reformulated market and that is a very separate market.”

McTeague says gas prices are a reflection of “local fundamentals” and are often at the mercy of what happens south of the border.

Add in the cost of refining in the States and a historically weak Canadian dollar, and you have a recipe for more expensive gasoline once it’s shipped back to Canada.

“As Canadians we buy all of our commodities, whether they’re made here or elsewhere, in US terms and particularly energy commodities like petroleum products,” said McTeague.

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“When the loonie continues to fumble or fall because of, ironically, the devaluation of crude, it means that our purchasing power goes out the window.”

In the case of Yellowknife, however, McTeague believes retailers are reaping the benefits of a higher-than-average retail margin.

“At $1.129, there’s a lot of money being made between the wholesale price of picking up that gasoline in Hay River and transporting it [to Yellowknife],” he said.

“Retail margins there are a fantastic 25 cents. The rest of the country would see much lower with higher volumes going through – up to 15,000 litres a day in big cities.

“There’s no doubt that a lot of this is due to retail margins and they’re pretty rich in terms of the gas price you’re paying today at 1.129.”

Earlier this week, an economist with the Bank of Montreal suggested Canadians were being ripped off at the pumps, but McTeague says drivers coast-to-coast shouldn’t expect any relief anytime soon.

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