Sylvie Willis
Diesel prices in Alberta, Canada, have been a cause for concern among residents, with prices soaring higher than gasoline. As of May 2022, diesel prices in Alberta averaged around $1.87 per litre, compared to $1.89 per litre for regular gasoline. This price discrepancy has raised questions about the factors contributing to the high cost of diesel fuel in the province. Various factors, such as international demand, refinery profits, carbon tax, and competition from jet fuel, have been cited as potential reasons for the high diesel prices in Alberta. The impact of these prices extends beyond diesel vehicle owners, as diesel is a significant fuel for transportation, affecting the cost of goods and contributing to economic volatility.
| Characteristics | Values |
|---|---|
| Date | 23-Dec-2024 to 31-Mar-2025 |
| Average diesel price | 1.70 per liter |
| Minimum diesel price | 1.47 per liter |
| Maximum diesel price | 1.75 per liter |
| Carbon tax on gasoline | 11 cents per litre |
| Carbon tax on diesel | 13.4 cents per litre |
| Clean Fuel Standard tax | Affects diesel more than gasoline |
| Diesel refineries | Not many around |
| Diesel vs Jet fuel | Jet fuel demand may be higher |
| International demand | Up |
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What You'll Learn
Diesel is more polluting per litre
Diesel fuel is more expensive in Alberta for a multitude of reasons, one of which is the fact that diesel is more polluting per litre. This is due to the higher levels of carbon emitted during combustion, which results in a higher carbon tax rate being applied to diesel fuel. The carbon tax is a form of tax levied on fossil fuels based on the amount of carbon discharged when they are used. As of 2022, the carbon tax in Alberta was set at $50 per ton, resulting in a tax rate of $0.0979/m3 of carbon.
Diesel vehicles have come under scrutiny in recent years due to the amount of toxic emissions they produce. Science has shown that diesel vehicles produce over four times the amount of pollution compared to petrol cars. Diesel engines are "lean-burn", meaning they use less fuel and more air than petrol engines to achieve the same level of performance. As a result, diesel fuel contains more carbon per litre than petrol (2.68kg CO₂/litre compared to 2.31kg CO₂/litre for petrol).
The negative health impacts associated with diesel emissions have been well-documented. Fine particulate matter emitted from diesel engines has been linked to poor heart health, with increases in background concentrations leading to a higher number of hospital admissions and deaths from heart attacks. Additionally, diesel engines produce nitrogen oxides (NOx), including toxic nitrogen dioxide (NO₂) and nitrous oxide (N₂O), which are harmful to both humans and the environment.
Despite the higher carbon emissions per litre, diesel cars were once promoted as a more environmentally friendly alternative to petrol vehicles. This was part of the EU's response to the 1997 Kyoto Protocol, which aimed to reduce greenhouse gas emissions, particularly carbon dioxide (CO₂). While diesel engines emit less CO₂ overall due to their increased fuel efficiency, the focus on CO₂ emissions caused other toxic emissions to be overlooked.
To address both CO₂ output and toxic emissions, governments may need to start banning vehicles with internal combustion engines, particularly in urban areas. Well-maintained diesel cars built to the latest standards now have similar emissions levels to new petrol vehicles. However, for most cars built in the past 20 years, petrol vehicles are likely to be less polluting overall.
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Few diesel refineries
One of the reasons for the high price of diesel fuel in Alberta is the limited number of diesel refineries in the region. This shortage allows stations to increase prices, as they are aware that drivers have few alternative options.
The lack of refineries also means that the cost of refining diesel is higher, which is passed on to consumers in the form of higher prices at the pump. The federal government's Clean Fuel Standard tax also affects diesel more than gasoline, contributing to the overall higher cost of diesel fuel.
The limited number of refineries also affects the supply of diesel fuel. When international demand for diesel increases, refineries must add a significant margin to their profits to ensure a steady local supply. This can result in higher prices for consumers, even if there is no infrastructure to export the refined diesel from Western Canada.
The competition for resources in the middle of an oil barrel also impacts the availability and cost of diesel fuel. Diesel fuel competes with jet fuel and heating oil, which are similar products. As air travel increases, the demand for jet fuel rises, and refineries may choose to produce more jet fuel at the expense of diesel, reducing the supply of diesel fuel and driving up costs.
The high cost of diesel fuel has significant economic implications, as diesel is the primary fuel for the transportation industry, powering semi-trucks, trains, and ships. This results in increased freight costs, which are passed on to consumers in the form of higher prices for goods and services. The cost of diesel fuel is, therefore, a critical factor in inflation and economic volatility.
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Clean Fuel Standard tax
The Clean Fuel Standard (CFS) is a part of Canada's climate plan, which aims to reduce carbon emissions and slow down climate change. The CFS will be a performance-based approach designed to incentivize innovation and the adoption of clean technologies in the oil and gas sector. It will also encourage the development and use of low-carbon fuels throughout the economy. The CFS will make a significant contribution to Canada's target of reducing national emissions by 30% below 2005 levels by 2030.
The CFS will apply to all fossil fuels, including liquid, solid, and gaseous forms. The first phase of the CFS will focus on liquid fuels, such as gasoline and diesel, which are primarily used for transportation. The transportation sector contributes about one-quarter of Canada's emissions. By ensuring cleaner fuels, the CFS will work in tandem with investments in public transit, making zero-emission vehicles more affordable and stringent vehicle emissions standards.
The CFS will require fossil fuel suppliers and importers to reduce the lifecycle carbon intensity of the fuels they produce and sell in Canada over time. This means accounting for all GHG emissions associated with the extraction, production, distribution, and use of the fuel. The goal is to achieve a 15% reduction in the carbon intensity of gasoline and diesel used in Canada by 2030, compared to 2016 levels.
The CFS will also create incentives for the development and adoption of clean fuels, technologies, and processes. For example, the CFS uses a lifecycle approach for measuring carbon intensities, which will incentivize the production of cleaner renewable fuels. Additionally, the CFS will enhance the demand for clean technology, making it easier for companies to innovate and invest in projects that reduce emissions.
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Jet fuel demand
While there are many factors contributing to the high price of diesel fuel in Alberta, jet fuel demand is not one of them.
In 2019, the last year before the COVID-19 pandemic, jet fuel demand was 8 million barrels per day (Mbpd), made up of 7.7 billion people traveling an average of 900 air miles per person. The average fuel economy was 54 passenger miles per gallon. By 2050, jet fuel demand is predicted to increase to 18 Mbpd, as the global population rises by 25%, jet fuel use per capita doubles, and fuel economy per aviation mile rises by 20%.
However, it's important to note that these predictions may not come true, as decarbonizing aviation is challenging due to the requirement for very energy-dense fuels. Jet fuel might reach 12,000 Wh/kg, while batteries today are only a fraction of that at 250 Wh/kg and will, at best, reach 1,250 Wh/kg. Sustainable aviation fuels have been evaluated, but they are generally very expensive, hard to scale, and less thermodynamically efficient.
In the United States, commercial aviation typically accounts for around 85% of jet fuel consumed. General aviation accounts for around 8%, and military and government consumers account for around 7%. In 2023, U.S. jet fuel consumption averaged 1.65 million barrels per day, 5% below the pre-pandemic high in 2019. This suggests that U.S. aviation had not fully returned to normal operations in the third year of the pandemic. The increasing fuel efficiency of newer airplanes has also contributed to limiting jet fuel consumption in the U.S.
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Inflation
The high cost of diesel has a significant impact on the economy as it is the fuel that powers freight, including semi-trucks, trains, and ships, which are responsible for transporting goods across the country. As a result, the cost of goods has increased, affecting all Canadians, even those who do not drive or own diesel vehicles. This has led to a volatile period of rising costs and decreasing value.
Diesel prices have soared higher than gasoline prices, with a notable difference in Alberta, where diesel was almost 50 cents more expensive per litre than gasoline in 2022. This has had a significant economic impact, with transportation operators facing one of their largest costs. The high diesel prices have contributed to inflation, affecting the prices of groceries, clothing, and other goods that rely on freight transportation.
The refineries' proximity to Alberta has resulted in a discount due to reduced transportation costs and increased competition. However, the higher tax rate on diesel, which is used predominantly by transport vehicles, seems counter-productive to some. The carbon tax has been blamed for the price variation, but the difference in taxation between gasoline and diesel is relatively small and is only adjusted once a year. Therefore, other factors, such as international demand, profit margins, and the Clean Fuel Standard tax, are likely to have a more significant impact on diesel prices and, consequently, inflation.
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Frequently asked questions
Diesel fuel is more expensive in Alberta due to higher carbon taxes, international demand, and competition with jet fuel. Diesel is a highly taxed fuel source because it is more polluting per litre. This, combined with higher international demand, has led to refineries adding $0.50 per litre to their profit margins. Diesel also competes with jet fuel, so as demand for air travel increases, refineries may produce more jet fuel, reducing the supply of diesel.
The high cost of diesel impacts all Canadians, not just those who drive diesel vehicles. Diesel is the primary fuel for the economy, powering semi-trucks, trains, and ships, so it affects the cost of transporting goods. This, in turn, leads to higher prices for consumers across the board, from groceries to clothing.
Diesel prices are typically higher than gasoline prices. On one day in May 2022, diesel prices averaged $2.22 per litre, while regular gas was $1.89 per litre.
Several factors influence the price of diesel, including carbon taxes, international demand, competition with jet fuel, and the cost of refining the fuel. The Clean Fuel Standard tax, imposed by the federal government, also affects diesel more than gasoline.
While the carbon tax contributes to higher diesel prices, it also has benefits. The tax helps to fund government services and ensures that Albertans receive a share of the profits, rather than all the money going to private corporations. Additionally, the carbon tax provides an incentive to use cleaner fuels, as they are cheaper per litre due to emitting less carbon.
