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Weds., January 30, 2013 www.revelstoketimesreview.com Vol. 115, No. 05
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Is Revelstoke getting hosed at the pump? The Revelstoke region has amongst the highest prices in B.C. Here’s what you can do to help lower prices. Aaron Orlando
editor@revelstoketimesreview.com
Compared to neighbouring communities, Revelstoke’s getting gouged at the pump, Mr. Editor, so why don’t you do something about it? High gas price complaints are one of the most common story suggestions I get. The complaint is often of a conspiracy or collusion designed to hose consumers. Locally, the idea is that because Revelstoke is geographically isolated, highway motorists are forced to fill up here before the jump over Rogers Pass – or in any other direction. Gas stations have all travellers over a barrel, but the ones that end up paying the most are Revelstoke locals. For example, we endured a months-long stretch of 129.9 cents a litre period before Christmas, and according to bcgasprices.com still live in the zone tied for the highest prices in B.C. This is despite the fact that Lower Mainland motorists pay an extra transit tax. Most gas price complaints I get focus on the prices of gas in general. I’ll admit I approach those suggestions with a bit of a closed mind; I strongly doubt even the most revved up, high-octane editorial piece will force multinational oil corporations to take any notice. But what about the local angle? As I’m writing this (Jan. 27) Revelstoke is paying 125.9 cents per litre, which is eight cents a litre more than Salmon Arm, and about 21 cents more than Kamloops. Why? So, I spent the lion’s share of my time over the past week talking with stakeholders and experts about the issue. While I don’t think this story in itself will make much of a difference, it does present a roadmap of how residents can come together to affect change in the price of gas locally. If you organize and take action, it’s possible to get prices down so they’re competitive with neighbouring communities. Maybe.
The economist cites competition Mariano Tappata is an assistant professor in Strategy and Business Economics at UBC’s Sauder School of Business. He’s authored a paper on pricing strategies and the retail gasoline market. When his friends speak with him about gas prices, conspiracy and collusion come up quickly, but the economist said the price in local markets is most often influenced by a set of market factors. Competition is a main one. A smaller market with fewer stations is less competitive. If one entity owns two stations, the market is even smaller than it seems (which means the new Petro-Canada planned for the
Gas prices have held at 125.9 for regular in Revelstoke for weeks. Here is the familiar morning rush of snowmobilers fuelling up at the Shell station on the Trans-Canada Highway. Aaron Orlando/Revelstoke Times Review
lot next to McDonald’s won’t really be an ‘extra’ station, since the 7-Eleven is also Petro-Canada). Another factor is the nature of the market. Big box retailers who operate a gas station on their lot often use the price of gas as a “loss leader” – meaning they break even or lose on the price of gas in order to attract customers. This brings the price of gas down in the entire market. Local regulations that affect market entry also count. If zoning regulations or other local rules prevent or impede new businesses from entering the retail gas market, then less competition will likely result. If local taxes are relatively high, the price will be passed on to consumers. Chevron, Petro-Canada and Esso pay between about $23,500 to $28,500 each for all local taxes, including their convenience stores. The
Revelstoke Shell pays $84,976, including the Tim Hortons restaurant. Tappata said the market conditions in a small town tend towards higher prices. “[The gas station owner is] going to try to charge the highest price possible. Let’s be honest; he wants to try to maximize his profits,” he said. “Because you’re a small town, you only have three or four gas stations, so it’s natural that prices would be up. … The reason why it doesn’t happen in some other markets is because the number of gas stations is large enough to generate competition, and competition is what prevents gas station owners from setting high prices.” He recommended the city make sure the cost of entry into the gasoline retail market is as low as possible if lower prices is the goal. Tappata also notes that regulators and
governments had studied the issue of gasoline prices for years, but rarely found a silver bullet. “In very rare cases, they found collusion, actual price gouging,” he said. Tappata also said a gas station leaving the market could drive prices up. The PetroCanada has been closed for a few years. The Super Save Gas stopped selling gas a few months ago. Super Save Gas owner Matt Singh said he couldn’t compete as an independent because he’s forced to pay market prices. Company stations have direct deals with refineries. “It’s a vicious game,” Singh said. He hopes to sell gas again in the future.
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