Ontario energy quarterly: oil and gas in Q1 2021

Overview

Download the data used to create this report from the Ontario open data catalogue.

Source: Ministry of Energy fuel prices.

Source: Dawn and AECO from Canadian Enerdata Ltd.; Henry Hub from U.S. Energy Information Administration.

Source: OEB Natural Gas Rates effective January 1, 2021.

Ontario natural gas storage level (at quarter end)

135.4 Petajoule (PJ) (closing inventories, March 2021)

Source: Statistics Canada.

In Ontario, natural gas is stored primarily at the Dawn hub near Sarnia.

Natural gas transmission infrastructure

Regular gasoline retail prices

Source: Ministry of Energy. All prices in Current Dollars per litre. Provincial, Southern and Northern Ontario averages are weighted by population.
Fuels price survey information

Toronto^{footnote 1[1]} regular unleaded gasoline retail prices in Q1 2021 were 14.0 cents per litre (¢/L) higher than in Q1 2020. This was the result of crude oil costs (+8.8 ¢/L) and higher retail margins (+2.2 ¢/L) offset by lower wholesale margins (-0.8 ¢/L) plus applicable taxes (+3.8 ¢/L, or 2.2 ¢/L federal carbon tax plus 1.6 ¢/L HST). Crude oil costs would have risen by 2.6 ¢/L more than they did, had it not been for a 6% increase in the value of the Canadian dollar relative to the U.S. dollar from Q1 2020 to Q1 2021. Canadian crude oil and wholesale gasoline costs are affected by the CDN/US exchange rate because these commodities are traded on a North American and international basis.

Note: Retail gasoline prices are affected by crude oil prices, wholesale gasoline prices, and competition in the local retail gasoline market. Prices vary from city to city because of differences in market size and structure, costs, and the degree of local competition.

Ontario average retail gasoline price ($/L)

Pump price revenue shares, regular unleaded, Toronto

Retail diesel prices

Source: Ministry of Energy. All prices in Current Dollars per litre. Provincial, Southern and Northern Ontario averages are weighted by population.
Fuels price survey information

Toronto^{footnote 2[2]} retail diesel prices in Q1 2021 were 1.0 ¢/L lower than in Q1 2020. This was the result of lower wholesale margins (-8.1 ¢/L) and lower retail margins (-4.3 ¢/L), offset by higher crude oil costs (+8.8 ¢/L), plus applicable taxes (+2.6 ¢/L, or 2.7 ¢/L federal carbon tax4 minus 0.1 ¢/L HST). Crude oil costs would have risen by 2.6 ¢/L more than they did, had it not been for a 6% increase in the value of the Canadian dollar relative to the U.S. dollar from Q1 2020 to Q1 2021. Canadian crude oil and wholesale diesel costs are affected by the CDN/US exchange rate because these commodities are traded on a North American and international basis.

Note: Retail diesel prices are affected by crude oil prices, wholesale diesel prices, and competition in the local retail diesel market. Prices vary from city to city because of differences in market size and structure, costs, and the degree of local competition.

Ontario average retail diesel price ($/L)

Pump price revenue shares, ultra-low sulphur diesel, Toronto

Natural gas prices with storage and transportation costs for Enbridge Gas Inc., and EPCOR

Source: OEB Natural Gas Rates effective January 1, 2021.

Ontario's OEB rate-regulated natural gas rate zones

Ontario has five primary natural gas rate zones, which are rate-regulated by the Ontario Energy Board (OEB). Kitchener Utilities, and Utilities Kingston also operate in Ontario, but are not rate-regulated by the OEB.

Each quarter, OEB rate-regulated natural gas utilities adjust their gas supply charges based on a forecast of natural gas market prices over the next 12 months. Some components of these rates, such as the transportation charge, may change at the same time. Other components follow a different timeline, like delivery rates, which generally change once a year. Additionally, the “gas supply cost adjustment” is updated through the OEB's Quarterly Rate Adjustment Mechanism (QRAM)^{footnote 8[8]}, which captures any differences between forecast and actual commodity costs.

Following approval from the OEB, effective January 1, 2017, the price for the Union South Rate zone combined commodity and transportation costs into one gas supply charge going forward. For consistency of reporting, storage and transportation costs have been included in this section for all rate zones^{footnote 9[9]}

Effective October 1, 2018, the OEB removed provincial cap-and-trade costs in conjunction with the QRAM for Q4 2018. The removal of cap-and-trade costs resulted in a reduction of about 3.3 ¢/m3 from the delivery charge component of natural gas bills.

Effective January 1, 2019, Enbridge Gas Distribution (EGD) and Union Gas (Union) amalgamated to become Enbridge Gas Inc, however EGD and Union will continue to operate as distinct rate zones for the immediate term.

On April 1, 2019, the federal carbon tax came into effect at a rate of 3.91 ¢/m³ for natural gas. Effective August 1, 2019, the OEB approved the collection of the federal carbon tax through a new line item on natural gas bills. The federal carbon tax was therefore absent from Ontario natural gas bills during Q2 2019. Effective April 1, 2020, the federal carbon tax increased to 5.87 ¢/m³ for natural gas.

Effective October 1, 2020, EPCOR Natural Gas Limited Partnership (ENGLP) commenced the sale and distribution of natural gas for its Southern Bruce operations. On September 24, 2020 the OEB approved ENGLP's application for rates for Southern Bruce.

Natural gas price, including storage and transportation by quarter (¢/m³)

Average natural gas spot prices

Monthly average natural gas spot prices at select trading hubs ($/GJ)

Quarterly average natural gas spot prices at select trading hubs ($/GJ)

Source: Dawn and AECO from Canadian Enerdata Ltd.; Henry Hub from U.S. Energy Information Administration. Note: Prices for Dawn, Henry Hub, and AECO are based upon daily closing spot prices.

Annual Average Natural Gas Spot Prices at Select Trading Hubs ($/GJ)

Source: Dawn and AECO from Canadian Enerdata Ltd.; Henry Hub from U.S. Energy Information Administration. Note: Prices for Dawn, Henry Hub, and AECO between Jan. 2019 and September 2019 are based upon daily closing spot prices.

Natural Gas Price Forecasts for Select Trading Hubs, 2021-2022 ($/GJ)

Source: Deloitte Price Forecast - Oil, Natural Gas, & Chemicals – March 31, 2021.

Ontario natural gas storage balances

Monthly closing inventories in Ontario (PJ)

In Ontario, natural gas is stored primarily at Dawn, ON.

According to seasonal patterns, storage levels normally peak in late October or early November as withdrawals for natural gas heating begin to outpace storage injections. Prices are also more likely to see a cyclical rise during the winter heating season. Utilities buy a certain amount of natural gas during the summer months when the price is cheaper. The supply is stored, and then delivered to customers during the colder months.

Average Monthly Natural Gas Bills

While natural gas prices are set quarterly, natural gas customers are billed monthly. As natural gas consumption patterns change from month to month, so too does the size of a customer's natural gas bill. Therefore, while natural gas rates stay the same over a three- month period, the size of the bill can vary based upon the level of consumption, with seasonality being the greatest factor (i.e., heating demand during periods of cold weather).

The natural gas bill for a residential customer in Ontario has five primary components:

• Customer Charge: a fixed charge that is typically set annually, and is the same every month, regardless of the level of consumption;
• Gas Supply: a volumetric charge based upon consumption, set quarterly;
• Delivery Charges: volumetric charges based upon consumption, typically set annually;
• Federal Carbon Charge (FCC): a volumetric charge based upon consumption, set annually by the federal government;
• Harmonised Sales Tax (HST): a 13% tax on the retail price (i.e., the combination of all charges mentioned above).

Average Monthly EGD Bill

Average Monthly Union NE Bill

Average Monthly Union NW Bill

Average Monthly Union S Bill

Average Monthly EPCOR Aylmer Bill

Source: OEB

Note: All data based on averages of monthly consumption provided in OEB Bill Calculator for residential customers.

Propane Market

Ontario’s propane market is not subject to economic regulation or oversight by the Ontario Energy Board (OEB). Wholesale propane commodity prices are determined in a competitive, integrated North American market. In Ontario, propane distributors compete to supply end-users and retail prices are set through transactions between a distributor and a customer based on a number of factors including: local supply and demand; time of year; and transportation costs.

Mont Belvieu, Texas is the benchmark pricing point for North American propane markets, as it is the largest producing region.

Sarnia has significant underground storage infrastructure for propane and is a wholesale storage and trading hub for propane markets in Eastern Canadian and the U.S. Great Lakes region. Demand for propane is highly seasonal so storage inventories are replenished in the summer months to be drawn upon for the next winter heating season.

Similar to natural gas, propane prices tend to decrease in the summer months, and increase in the winter heating season. The length and severity of the winter will typically have a corresponding impact on the price of propane.

Due to the unregulated nature of the propane market and limited pricing data from private sector suppliers, the Ministry of Energy does not maintain historical retail prices for the residential propane market.

Monthly Average Wholesale Propane Prices

Source: U.S. Energy Information Administration, Kent Group Ltd..

Eastern Canadian Propane Inventories

Monthly Propane Storage Supplies for Eastern Canada

Source: Canada Energy Regulator.