Why are gas prices high in Canada if there is so much oil?

At its core, Canadian gas prices reflect a global market where oil is priced internationally, but the domestic story is more complicated. Canada's oil sector is a pillar of the economy. On a broad measure that captures both direct activity (exports, sector investment) and indirect contributions like infrastructure construction and engineering, the sector accounted for 7.7% of nominal GDP in 2023, or roughly $208.8 billion. Measured more narrowly, by direct output alone, the Canadian Association of Petroleum Producers puts the sector's share of GDP closer to 3.7% for the same year. Both figures are accurate; they simply count different things.

Canada produces far more oil than it can process at home. According to the Canada Energy Regulator, Canadian production averaged 5.13 million barrels per day in 2024, up from 4.93 million in 2023, and reached a monthly record of 5.44 million barrels per day that December. Domestic refining capacity, by contrast, sits at roughly 1.93 million barrels per day across the country's operating refineries, per Oil Sands Magazine's compilation of industry and Statistics Canada data. That means Canada produces close to three times what its refineries can handle, and can process only a little over a third of its own output. The rest is exported as crude, not refined elsewhere on Canada's behalf. There is, however, a separate and costly arrangement. Canada does send some oil south to U.S. refineries for processing and then buys the refined products back.

This happens not because Canada lacks oil, but because most Canadian refineries, many of them built between 1950 and 1970 for lighter crude, are not equipped to handle the heavier, higher-sulphur oil that Alberta primarily produces. Rather than invest billions to retrofit or build new refineries capable of processing heavier crude, the industry at the time chose to export it to the U.S., where refineries have since invested heavily to handle it. As a result, many Canadian refineries have closed.

The infrastructure gap runs east-west as well as north-south. Alberta produces far more oil than western Canada can consume, but there are virtually no pipelines connecting western production to eastern markets, and no practical waterways to fill that gap. This makes it cheaper for provinces like Ontario to import oil from the U.S. than to receive it from Alberta. Canada imports billions of dollars worth of oil and gas annually, largely as a consequence of this internal disconnect. Western Canada (Alberta and British Columbia) primarily consumes its own oil. A refinery in Burnaby, B.C., for instance, processes oil piped in from Alberta and northern B.C. That model simply doesn't extend east.

Over decades, the Canadian and American industries have grown deeply intertwined: raw, unrefined oil flows south, and finished products flow north. The arrangement is economical in the short term but leaves Canada exposed, paying for refining capacity it never built.

Beyond infrastructure, taxes add significantly to what Canadians pay at the pump, a key reason prices here consistently exceed those in the U.S. British Columbia has had some of the highest gas taxes in the country. However, the burden varies sharply by region. An analysis by the Canadian Taxpayers Federation found that in 2024, Vancouver drivers paid roughly 81 cents per litre in combined taxes, Victoria drivers about 74 cents, while the rest of the province paid just over 61 cents. Those figures fell after the province eliminated its consumer carbon tax effective April 1, 2025, a change the B.C. government estimated would take approximately 17 cents per litre off the price of gasoline.