Canadians paying far too much for Gas

[JSz]

Consumers Being Gouged At The Pumps, Study Finds

Thursday May 10, 2007

It's one study where Canadians likely won't be surprised by the results. Consumers in this country are being cheated at the gas pump, according to an investigation by the Canadian Centre for Policy Alternatives. The think tank found that motorists are being overcharged between 15 and 27 cents per litre depending on where they're filling up.

"For example, drivers in Toronto are currently being overcharged 15 cents per litre," said CCPA research associate Hugh Mackenzie, who did the analysis. The economist figures that the gouging has taken place since Hurricane Katrina in August 2005. Since that time, prices have been consistently higher than they should be, taking costs of gas production and distribution into account.
Drivers in Vancouver fare the worst - they're apparently paying 27 cents a litre more than they should. In Winnipeg motorists are overpaying by 21 cents a litre, in Halifax 19 cents per litre, and 18 cents per litre in Edmonton.

"And every penny per litre generates an additional $1 million for the oil and gas industry every day from gasoline sales alone," says Mackenzie, who has developed a calculator to determine how much consumers are overpaying depending on what they pay and where.

His report claims once the oil companies broke the psychological loonie-a-litre level, it was open season on your wallet. And they'll use whatever excuse works. When the problem is in the U.S.- like a shortage or a hurricane - that's the reason for a sudden spike. But if there's a refinery fire in Nanticoke, what's happening Stateside no longer matters, and the problem is here. The study calls both explanations "after-the-fact rationalizations for the price-gouging opportunities seized by the oil industry, or noise introduced into the discussion to distract attention from what is really going on."

For Toronto motorists willing to wait to fill up, the Canadian Tire gas bar at Queensway and East Mall was charging about 20 cents a litre cheaper than the average price at other stations on Thursday as part of a special promotion. But that deal won't last, and drivers should be aware that they'll probably have to wait at least a half hour to fill up there.

The study information can be found from the CCPA's website:
http://www.policyalternatives.ca/
To find out how much you're being cheated on gas, try the gas gauge calculator:
http://www.gasgouge.ca/
Link to report (pdf):
http://policyalternatives.ca/documents/National_Office_Pubs/2007/Gas_Price_Gouge_2007.pdf
Gas prices across Canada
http://fuelfocus.nrcan.gc.ca/price_map_e.cfm#allprices





So how much should you really be paying to lap up a litre? Here are the figures for various Canadian cities from the Centre's report as of May 8, 2007. They've been calculated using the actual refining margins set in June and July 2005 - right before Hurricane Katrina.


Toronto
Actual Price: $1.02.2
Price Should Be: 87.1 cents
Unexplained difference: 15.1 cents

Vancouver
Actual Price: $1.23.3
Price Should Be: 96.1 cents
Unexplained difference: 27.2 cents

Edmonton
Actual Price: $1.02.4
Price Should Be: 84.2 cents
Unexplained difference: 18.2 cents

Regina
Actual Price: $1.13.9
Price Should Be: 92.1 cents
Unexplained difference: 21.8 cents

Winnipeg
Actual Price: $1.07.7
Price Should Be: 86.8 cents
Unexplained difference: 20.9 cents

London
Actual Price: $102.9
Price Should Be: 87.9 cents
Unexplained difference: 15.0 cents

Ottawa
Actual Price: $1.03.5
Price Should Be: 89.4 cents
Unexplained difference: 14.1 cents

Montreal
Actual Price: $1.10.3
Price Should Be: 96.7 cents
Unexplained difference: 13.6 cents

Saint John, N.B.
Actual Price: $1.16.7
Price Should Be: $1.00.4 cents
Unexplained difference: 16.3 cents

Halifax
Actual Price: $1.17.4
Price Should Be: 98.0 cents
Unexplained difference: 19.4 cents

Charlottetown
Actual Price: $1.16.7
Price Should Be: $1.00.4 cents
Unexplained difference: 16.3 cents

St. John's, Nfld.
Actual Price: $1.16.7
Price Should Be: $100.4 cents
Unexplained difference: 16.3 cents

 

[BitWhys]

what the market will bear

we're not talking global competitiveness here so cue the competition mythologists.

 

[folcar]

Well it certainly doesn't take rocket science to see the price of oil drop and the price at the pump jump, the oil execs know what they are doing and getting stinking rich off us all. I'd just lie a serious alternative and it's see ya later chumps, fill up at your own damn pumps!

 

[missile]

We've always known we were being robbed..no matter what the 'experts' told us:-(

 

[Phil B]

You want a proper moan about gas prices then you should move to England -
96.9p/litre at my local pump converted to can $2.13 / Litre

 

[Walter]

Buy oil stock and stop complaining.

 

[s243a]

Wasn't there a shortage in gas in Ontario not long ago? The price of gas and oil will only follow each other if there is sufficient refining capacity. The oil prices probably fell because there wasn't enough refineries to sell it to.

 

[snfu73]

That's gas for you. I think it's good...if it gets more people out of their cars, or thinking about how much they are spending on gas...it's good for the environment. Plus, hey, why complain about it? If it costs too much, come up with a good alternative. Who knows, you might get rich from creating a new alternative!!

 

[gc]

How do they determine what the price "should be"? The price should be whatever people are willing to pay, based on supply and demand. If you think oil companies are making too much, start your own company and sell it for cheaper. You'll make a killing

Oh, and I agree with snfu73. Less gas = better for the environment. I've always found it odd why so many people complain that gas prices are too high, but think we should be doing something about global warming. Sometimes, some people can be hypocrites.

 

[s243a]

How do they determine what the price "should be"? The price should be whatever people are willing to pay, based on supply and demand. If you think oil companies are making too much, start your own company and sell it for cheaper. You'll make a killing :icon_smile:

Oh, and I agree with snfu73. Less gas = better for the environment. I've always found it odd why so many people complain that gas prices are too high, but think we should be doing something about global warming. Sometimes, some people can be hypocrites.

The theory of supply and demand is based on a perfectly competitive market. Gas production takes considerable capital investment and as a consequence there are considerable barriers to entry. That said the majority of profits are in selling oil. The profit margin in refineries is considerably smaller. Oil companies like to have refining capability so they are guaranteed to be able to sell a certain percentage of their oil. The refinery business has small profit margins and is no where near as lucrative as people think.

 

[gc]

The theory of supply and demand is based on a perfectly competitive market. Gas production takes considerable capital investment and as a consequence there are considerable barriers to entry.

Yes, but as long as there is more than one company (excluding a cartel), the company that charges less for the same product will get more business and therefore it would be stupid for them NOT to want to lower prices (to a certain extent, while retaining at least some profits). And there is no monopoly for people who live reasonably close to work, not so long as there are bus passes and bicycles

...or as Walter said, buy some oil company stock

 

[BitWhys]

Yes, but as long as there is more than one company (excluding a cartel), the company that charges less for the same product will get more business and therefore it would be stupid for them NOT to want to lower prices (to a certain extent, while retaining at least some profits)...

That's not necessarily the case

In a market dominated by an oligarchy there is no benefit for any one company, particularly the smaller competitors, to lower its price if they are already selling at or near capacity as it would only yield less return on the same volume of sales. Large corporations make a point of not growing beyond capacity. "They" prefer to merge since it makes for raises all around and improved chance for promotion in the upper echelons.

 

[s243a]

And there is no monopoly for people who live reasonably close to work, not so long as there are bus passes and bicycles :icon_smile:

Monopoly usually refers to supply side and not the demand side. That said your point about a free substitute is mildly interesting.

 

[gc]

That's not necessarily the case

In a market dominated by an oligarchy there is no benefit for any one company, particularly the smaller competitors, to lower its price if they are already selling at or near capacity as it would only yield less return on the same volume of sales. Large corporations make a point of not growing beyond capacity. "They" prefer to merge since it makes for raises all around and improved chance for promotion in the upper echelons.

Why wouldn't the companies expand and increase capacity? Wal-mart is extremely successful because it sells for cheaper, makes a profit, and continues to expand. If wal-mart had stayed as a single store, they would not be making nearly as much profit, no matter what their profit margin was.

 

[Pangloss]

My bicycle gets excellent mileage - and the gas comes from homemade minestrone.

Cars are subsidized - drivers don't pay but a fraction of the infrastructure costs for keeping the roads paved, clear of snow and policed.

What about the environmental costs of all those single-occupant vehicles?

Tough beans about the price of gas - every driver is getting a heck of a deal as it is.

When did driving become a right?


Pangloss

 

[BitWhys]

Why wouldn't the companies expand and increase capacity? Wal-mart is extremely successful because it sells for cheaper, makes a profit, and continues to expand. If wal-mart had stayed as a single store, they would not be making nearly as much profit, no matter what their profit margin was.

Infrastructure and technology are two deciding factors of whether a market has a tendency toward oligarchy.

Stocking the shelves of a cookie-cutter retail outlet and bringing an oil refinery online (for example) are two different things. The levels of investment, technology, relevant expertise and, from a planning perspective, risks to the supply chain that threaten the stability of materials cost are worlds apart. The latter explains the marked tendency for companies in oligarchical markets to expand vertically.

In effect you're asking why Esso doesn't put in more gas bars. Well. location location location. Here's something else to consider about that. The franchise outlets get their prices phoned over to them.

 

[gc]

Stocking the shelves of a cookie-cutter retail outlet and bringing an oil refinery online (for example) are two different things. The levels of investment, technology, relevant expertise and, from a planning perspective, risks to the supply chain that threaten the stability of materials cost are worlds apart. The latter explains the marked tendency for companies in oligarchical markets to expand vertically.

I would imagine that building a company like walmart would also take considerable investment.

Anyways, the way I figure it, that is all irrelevant. If people think that they can get oil cheaper by another means, they would. Oil companies simply offer oil at the cheapest price, and that is why people buy it. If people didn't think it was a good deal, they wouldn't buy it.

The worst thing that could happen is people drive less, which is good for the environment. People who pollute should pay...I just wish that money was going towards the government rather than oil companies...

 

[Liberalman]

The complainers of high gas prices will be taught another lesson by the oil companies.

A couple of days ago the oil refinery in Ontario that had the fire that closed a lot of the gas stations had a massive power failure and company officials said it will take longer to make sure everything is working which means the refinery will not be at full capacity.

The oil companies are responding to consumer complaints and government probes and they are doing this by shutting down the pumps.

In the winter time when there was a fire at the oil refinery it was shut down and slowly the gas pumps were not getting the much needed fuel to sell to the customers so they station started rationing and some were raising their prices.

The Truck drivers had to stop and park their rigs on the side of the highways because they couldn't fill up with fuel and commerce was choking in Ontario.

Trucks deliver the majority of products to the communities and some communities had to go without on essential and life sustaining products.

Since there is a monopoly in this sector all other oil companies are watching this carefully.

Since people are unwilling to turn to other ways of getting their fuel or convert diesel to electricity and haul it that way then you will always have this problem.

If the government tries to step in and forcefully do something then no oil would be shipped to Canada.

Canada has oil in Alberta and the east coast but the provinces don’t want to give it up and help the rest of Canada.

Stephen Harper will have to make some hard decisions about this crises and the best thing the Conservative party can do is call an election so they can get out of government gracefully and let the Liberals make those hard decisions.

When Canada is in a better and more stable footing then the Conservatives can try for the leadership again.

What the oil companies are doing will result in their downfall one day, but unfortunately not today so we must suffer in the short term.

 

[Walter]

The Truck drivers had to stop and park their rigs on the side of the highways because they couldn't fill up with fuel and commerce was choking in Ontario.

Trucks deliver the majority of products to the communities and some communities had to go without on essential and life sustaining products.

I live in Ontario and heard nothing about people going without 'essential and life sustaining products'. Could you supply proof of this, please?

 

[Walter]

the best thing the Conservative party can do is call an election so they can get out of government gracefully and let the Liberals make those hard decisions.

Just like they(the Liberals) did with the NEP and that drove Canada into a recession.