Cochranites are fed up with gas prices in town if correspondence to the Cochrane Eagle and rants on social media are any indication.
For the past month, posts and letters have intensified as Cochrane gas prices continue to be as much 10 cents per litre higher compared to Calgary.
Getting to the bottom of gas pricing is mystifying as companies have no obligation to reveal their pricing strategy.
According to both the Shell and Husky stations in Cochrane, prices are delivered to them from head office and based on a survey of all pump prices in the community.
A representative at the Husky station said that survey is conducted three times a day.
However, pump prices in Cochrane are virtually the same at each of the stations and have been consistently set at the $1.20 or higher range since summer pricing kicked in. Summer pricing refers to the fact gas prices rise about four or five cents per litre to offset the cost of additives to prevent evaporation and supply interruptions as refineries shut down for routine maintenance.
The Cochrane Eagle reached out to both Shell and Husky. Shell had not responded by press time and Husky suggested contacting Canadian Fuels Association who suggested contacting Jason Parent, of the Kent Group - a company that specializes in data and analytics relating to the downstream (refining and fuels marketing/retailing) petroleum industry.
Parent said there are a lot of factors that can be attributed to Cochrane's pump prices being so much higher than stations only 15 to 20 minutes away in the city.
"The primary contributor in something like that would be average throughput in Cochrane compared to Calgary," said Parent, explaining that a component to the pump price - between six and 10 cents a litre - covers the cost of doing business and lower volume of sales leads to higher fuel prices to cover cost.
However, that is not the only factor and Parent said there are factors in Calgary that drives prices down other than higher volume of sales.
"The existence of big box stores such as Costco in Calgary influences the market," he said.
Why would those same factors not influence Cochrane considering proximity?
Parent said competitive regions are decided on by the companies and that is why it is not uncommon, for instance, to see parts of Calgary priced differently than other areas.
As for whether suggested boycotts might force prices in Cochrane down, Parent said it is possible.
"If stations in Cochrane see the volume decrease enough, (the stations) will have to look at competitiveness," he said. "Obviously, not enough people are doing that (shopping elsewhere) to incentivize them to do that."
Dan McTeague, senior petroleum analyst with GasBuddy.com, expanded on Parent's explanation saying stations selling gas for $1.15 a litre or lower are doing so at a loss.
With the current wholesale price for gasoline sitting at 80.5 cents per litre, McTeague said once taxes are calculated - 13 cents for the province, 10 cents for the federal government, 6.73 cents for Carbon Tax and then GST – any gas stations selling for $1.15 a litre have eliminated their profit margin from the equation, which is around 8 cents.
"It's the eight cent margin being played with like a yoyo," said McTeague. "There is no money selling gasoline ... gasoline is considered a loss leader."
In essence, McTeague says the competition realities in Calgary are forcing stations to sell gasoline at a loss or break even in the hopes of using the sale of in-store products to make up the losses.
