I realize we were paying close to $1.00 per litre in Ottawa before Katrina and that it is now about $1.10. But that is still mis-leading. Katrina sent gas prices from 95.5 (I filled up that day) to $1.28 over night. During a good chunck of that 5 weeks, it ranged from as high as $1.38 to as low as $1.02. I would say it has been hovering around the $1.15 to $1.20 for about 3 of those 5 weeks.Well, love is an awfully strong word - and I'm spoken for. But here's an explanation from a 2004 Slate article:
My suspicion was raised by how fast the price of gas can go up, but how s-l-o-w it goes down. And how it never seems to go back to where it was.
I would love to have an explanation of that. the right usually likes to blame government taxes as the cause of high prices, for some reason.
Convenience store owners buy gas every day or once every couple of days, and they constantly adjust their prices. But as this Energy Department report shows, it takes about 10 weeks for a change in the spot price of oil to filter fully into the retail price of gas, with about half the change working its way in within two weeks. This lag is a boon for convenience store owners when gas prices are plummeting: The price they pay to fill up their tanks falls rapidly, while the price they charge falls more slowly. But it's poison when prices are rising. Each day they pay more to fill up their tanks, but they're unable fully to pass on the hikes to their customers.Of course, if you've had to eat a high price increase a month ago, you're going to squeeze the customer for as long as you can in the down-swing. Now, whether or not this counts as "gouging" is I think up to debate. The prices are coming down, after all. And the industry has a legitimate need to recoup costs.
Of course, as I said before, I'm not about to rule out corporate malfeasance.
(If you want a relatively clear explanation of the mechanics of the gasoline retail industry, read the whole Slate piece.)
As for why it's unlikely to come back down to where it was: Well, there had to be some reluctance on the part of the retailers to break the $1/litre mark. In some places, the signs weren't even capable of it until Katrina forced them to buy new ones. I know one Esso stop in Toronto near my house was regularly at $0.999/litre for days on end before Katrina - I think they'd probably have preferred to move the price up to $1+ before Katrina, but either didn't have the signs for it, or were worried about the sticker shock.
(10am Oct 7: Post edited to more closely resemble the english language.)
2 comments:
Thanks for the expanation and the slate link.
Ok John, one more thing that occured to me this weekend, whilst driving around Ottawa visiting relatives:
What the slate article says an what you state seem to be true for places like Suny's and McEwan's and other "independants". But it falls apart when you consider that most gas stations are actually owned by the oil companies themselves.
There is no real competition, since the franchisee must purchase oil from their company and NOT on a free and fair market. This oligopoly behaviour means that when one oil company raises its price for oil and gas, it happens at all of its gas stations nearly simultaneously. Other oil company stations quickly follow suit. When most gas stations are in fact owned by the oil companies then, you position about the local owners carries a lot less wieght.
In other words, the oil comapny is making money at both ends - on the oil and again on the gas.
which means that there is still room for collusion and gouging.
Have you read the CCPA on this? What do you think of Mackenzie's assertion that gas prices should be much lower?
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