Feature: Getting Hosed at the Pump

Originally published September 28, 2015 on autoTRADER.ca

When it comes to gas prices, I think what bothers me the most is the apparent unfairness of it all. For instance, yesterday morning I heard that the price of a barrel of oil was $45.00 US, and like many people, I’m thinking that means gasoline should be way cheaper. But when I got to my local PetroCanada gas station, there was regular fuel still at $1.069. True, it was down from a buck-thirty a couple of years ago, but still…

After filling up and going through the gas station’s car wash, I emerged to see the price of gas had changed from $1.06.9 to $0.99.9. You’ve got to be kidding! In the space of five minutes I could have saved seven percent on my purchase. How does that work? It’s the same gasoline!

Canadian Gas Prices from 2010 to present, with data from Natural Resources Canada

Before I left, I had a chat with the gas station attendant.

“It’s not my fault!” she exclaimed, her hands raised almost instinctively like she was surrendering. “We’re on the Viper system!”

I said I knew it wasn’t her fault personally, but the Viper system? That sounds ominous. Tell me more.

“We follow the Esso and the Shell down the road. If they lower their prices, we do too.”

“Do you ever lower prices on your own?” I asked.

“No.”

“What do the Esso and Shell stations do?”

“They follow other stations, I guess.”

Reminds me of an old Goon Show line: “Follow me, I’m right behind you.” No wonder people think something’s going on.

Meanwhile other customers had entered the store and were chiming in, but they all had this kind of sad resignation about them. “It’s crazy,” one said, “But what can you do?”

What indeed?

Well, according to Dan McTeague, Senior Petroleum Analyst for gasbuddy.com, founder of tomorrowsgaspricestoday.com, former MP for Scarborough-Pickering in Ontario and long-time consumer advocate, it’s important to understand that the price of a barrel of oil has less to do with the price of gasoline at the pump than you may think.

“We hear a lot about oil,” he says, “but not a lot about gasoline. In fact, we have an oversupply of oil in Canada, where output has doubled in the past 10 years. A big part of the problem is that in 1970 we had 44 oil refineries in Canada, in 1993 it was down to 29 and now we have only 14 refineries. It’s the wholesale gasoline price you need to look at!”

That wholesale price was, at the time of this writing (it changes daily), is $0.615 cents (Canadian) per litre. While there are arguments for and against building more refineries (they produce a lot of jobs, cost eight-to-ten billion dollars to build, and likely would be exporters anyway), and while according to the Organization of Economic Cooperation and Development’s (OECD’s) International Energy Agency, Canada refines more gasoline than it consumes (we have an over-supply), the price of gasoline still seems strangely reluctant to go down and stay down.