Local gas prices have residents fuming

Posted on August 21, 2019 by Taber Times

By Greg Price
Taber Times
gprice@tabertimes.com

Complaints continue to be rampant on social media and coffee row in the area on the high price of gasoline in Taber compared to other towns and cities very close by.

As of Tuesday, gas could be found in Taber for purchase at 114.9 per litre, while in nearby Coaldale and Lethbridge, going west on Highway 3, gas is 106.9 and 10.9 respectively. Going east on Highway 3, gas was 109.9 per litre on Tuesday in Bow Island.

It is numbers that have not gone unnoticed among the populous of the town of Taber, where even when the carbon tax was repealed, there was a minimal moving of the needle to overall gas prices back in early June.

Mayor Andrew Prokop noted you are always going to have some wiggle room with gas prices in neighbouring municipalities, but for the close ones it is a matter of a few cents here or there — but when you are seeing healthy double-digit differences in prices, something is askew.

“I say shop local and if it’s in that reasonable competitive range, pay a little more. But is 15 per cent reasonable?” questioned Prokop. “I don’t think so, and that’s what you are seeing in gas prices. There are a lot of people upset about this. I’ve probably talked to 30 or 40 people just in passing on the street. It’s on people’s minds. You expect a little bit of range, but like 15 per cent?”

Prokop added it’s hard to encourage people to shop local when there is that big of a gap in gas prices. If people have to run errands into Coaldale or Lethbridge, it gives residents another reason to stay in those communities a little longer with their discretionary income which may lead to purchases.

There are a number of factors that can affect the final price of gas at the pumps from one region of Canada to another.

All provinces and territories place different taxes on gasoline. Higher taxes contribute to higher prices at the pumps. Taxes are one of the largest components of fuel prices in Canada.

In 2017, Canadians paid an average of 27.6 cents of tax on every litre of gasoline. It represents almost $14 on a typical 50-litre fill up (excluding sales tax).

Gas taxes vary significantly by province and in some cases by city.

Some cities have a municipal fuel tax.

Retailers in large cities usually sell more gas, which means they can charge less per litre and still make a profit, with margins being relatively low on gasoline.

Local supply and demand conditions vary from region to region, including the number, size, and type of competitors.

The presence of one or more aggressive price competitors in a local market may lead to lower prices.

It costs more to transport gasoline to the pumps in some regions of Canada from refineries, such as remote areas that are far from major cities.

These higher transportation costs will show up in the price of gas.

Crude oil is a globally traded commodity and is the base product used to refine gasoline and diesel fuel. As Canadian producers, there is no influence over world crude oil prices because our domestic crude oil production is a small fraction of the total global production. Crude oil prices are influenced by changes in global supply and demand, current inventory levels and geopolitical events.

Like crude oil, wholesale gasoline is bought and sold on commodity markets. And because gasoline is a commodity that flows freely between Canada and the US, Canadian wholesale prices (the prices retailers pay) are tied closely to US commodity prices. Because of this close tie to the US commodity prices, any significant disruption in supply in the US, a market 10 times the size of our Canadian market, can impact wholesale prices in Canada as well.

Despite all the various factors that go into the price of gasoline, for Bow River MP Martin Shields, some things still don’t add up for Taber’s prices compared to nearby competitors.

“What I don’t understand is you are so close to the Lethbridge market, why can there be this differential? I can understand in Brooks because you are an hour, hour 15 minutes away from your next city. We’ve been dealing with this forever, with high gas prices,” said Shields who was the former mayor of Brooks. “But Taber being close to Lethbridge, it’s a little more complicated. We know there is an isolation of the market in Brooks, but Taber, I don’t get that. Gas Buddy is a great source out there with apps nowadays. They can instantly see what the prices are in their neighbourhood. It’s informed people much quicker.”

Shields agreed with Prokop’s assessment that the noticeably higher gas prices gives people another reason to gravitate to other centres of commerce to spend their disposable income.

“Say you know you are going to Lethbridge for a medical appointment, 30 minutes away, another reason to be there, I’m going to buy my gas there rather than back here,” said Shields. “Consumer decision making comes into effect and it doesn’t turn out very well for Taber which is the bottom line. There’s a litany of things that happen with the repercussions from that. The ripple effect economically happens big time.”

Earlier in 2019, petroleum analysts centered on some other key factors predicted to affect pump prices in Canada, including rising futures prices and a weaker Canadian dollar. In smaller communities fuel inventories purchased at higher prices by the retailer often take longer to be consumed, contributing to prices remaining higher for a more lengthy period while older fuel inventories are purged.

As for allegations of collusion among some retailers regarding price setting, the Competition Bureau Canada indicates that “competing gas stations often charge similar or identical prices. Charging the same price is not illegal unless competing gas stations reach an agreement to do so.”