What effect do changing crude oil prices have on gasoline prices?
Crude oil is the raw material from which gasoline is refined, and changes in its price will affect the price of gasoline. In general, a change of one dollar (U.S.) a barrel in the international price of crude oil will change the cost of producing gasoline in Ontario by about 1 cent (Canadian) a litre at current exchange rates. Changes in crude oil prices first affect wholesale gasoline prices (the cost of gasoline at a bulk plant or terminal) and then retail prices. When crude oil prices are falling, competition from U.S. wholesale suppliers often forces Ontario refiners to lower their gasoline prices before they have sold their entire high-cost inventory. When crude oil prices are rising, higher wholesale gasoline prices in adjoining U.S. markets may cause Ontario gasoline retail prices to rise before the higher cost crude oil reaches the pump in the form of gasoline.
