Oil prices have fallen — so why is the price of gasoline skyrocketing across Canada?

The price of a barrel of oil has fallen by about 20 per cent in the past month, a situation that would normally result in a comparable decline in the price consumers see when they fill up their cars with gasoline. But imbalances between supply and demand have caused pump prices to move in the opposite direction, and the effect on Canadian drivers has been dramatic.

On a day when the benchmark price for a barrel of oil lost about a dollar, gasoline prices skyrocketed in parts of the country on Thursday, with Thunder Bay seeing average prices jump by as much as 20 cents a litre, and Edmonton and Calgary moved by a similar amount on Friday — even as the price of oil lost another 50 cents.

The pain is currently most acutely felt in British Columbia however, where the average price for a litre of gasoline is $2.39. That's the highest average price on record for any jurisdiction in North America.

While a lot goes into the price that drivers pay at the pumps, the main culprit in B.C. right now is a shutdown of one of the region's main refineries, reducing the supply of gasoline. But demand for drivers has held steady, which has jacked up the price of what's available.

The Phillips 66 refinery in Ferndale, Wash., was shut down for maintenance earlier this month, taking about 65,000 barrels a day worth of gasoline offline.

"B.C and Vancouver import every last barrel of gasoline and diesel from [that] region of the United States," said Vijay Muralidharan, an energy analyst with R Cube Economic Consulting Inc. "When the refining goes off, that amount of supply of gasoline gets shut."

Gasoline markets in North America are broadly divided into five zones, known as the Petroleum Administration for Defense Districts (PADD), according to the U.S. Energy Information Administration. Because supply is limited but demand is strong in the PADD-5 district that includes British Columbia, fuel from the four other regions is moving around to meet that need — and bringing up prices everywhere.

"You have to compete for those limited barrels," Muralidharan said. "So who pays the higher prices wins the product."

The refinery in Washington state isn't the only one offline right now. A refinery in Toledo, Ohio, has been shut down due to a fire, and it isn't expected to be back to full capacity until 2023, so those spread-out shutdowns are impacting prices across the United States, too.

"I don't know that I've ever seen a wider gamut of price behaviours coast to coast in my career," said Patrick De Haan, an analyst with GasBuddy.com. 

"A slew of unexpected refinery disruptions, including fires and routine maintenance, have seemingly all happened in a short span of time, causing wholesale gas prices to spike in areas of the West Coast, Great Lakes and Plains states — and some of those areas could see prices spike another 25-75 cents per gallon or more until issues are worked out," he said this week.

That comes at a time when the price for a barrel of the North American crude oil benchmark known as West Texas Intermediate has gone from $96 a barrel at the end of August, to as low as $76 at one point this week on fears of a global recession. The paradox of cheap oil coupled with expensive gasoline is cascading across the United States and spilling north of the border.

Prices in oil-rich Alberta are always lower than they are in the rest of the country, but pump prices in the province's two biggest cities jumped from below $1.50 a litre on Thursday to more than $1.60 on Friday. 

Prices in Alberta are up by about 10 per cent in the past week versus about 20 per cent in B.C. Thunder Bay's jump is directly impacted by that because "most of the gasoline gets to Thunder Bay through pipeline from Edmonton directly," said Paul Pasco with energy consultancy Kalibrate. "In terms of the magnitude of price shift that's happened in Thunder Bay, it's exactly where it should have been."