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Revved over gas prices

Politics and religion are in a race for most contentious subject in Cochrane with the new leader being the price of gas.
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Politics and religion are in a race for most contentious subject in Cochrane with the new leader being the price of gas.

Cochranites for more than a month have lamented, criticized and ranted regarding the discrepancy between the cost at the pumps in Cochrane compared to virtually everywhere else in the region.

For weeks, Cochrane prices have been up to 10 cents per litre higher than Calgary and on Thursday that difference skyrocketed to more than 20 cents per litre with some city station posting pump prices at $1.03 a litre compared to Cochrane's $1.24.

The dramatic Thursday decrease was a result of the province's stations no longer charging the Carbon Tax, which the UCP is axing as part of its election promise.

Those changes did not begin being reflected in Cochrane until Friday morning when pump prices dropped to $1.13 a litre, compared to approximately $1.07 in Calgary.

Why is there such a big difference?

That is the big question and the one that has people fuming.

The answer, unfortunately, is not simple but there are ways to ballpark how much the gas in a tank costs. First there is the posted rack rate, which is the cost of refined gas for that day. The rack rate is different depending on location and fluctuates frequently. For example, on May 31 the rack rate was 82.4 cents per litre compared to its 86 cents per litre the day before.

Now we must add the taxes. The federal government adds 10 cents per litre and the province adds another 13.73 cents per litre and then GST is tacked on. Up until Thursday, the Alberta Carbon Tax added another approximately 6 cents per litre.  With that in mind, Friday's base price for gasoline was $111.4 per litre. Stop screaming "then why was gas a dollar three in Calgary" at the page we're getting to that.

The day before the Carbon Tax was eliminated, the rack rate was 80 cents per litre, so if stations had old gas in the tanks, drivers saw a great deal, at $1.03 though that was still below $1.05 base price.

Dan McTeague, GasBuddy senior petroleum analyst and former MP, suggested stations with prices below the base cost after taxes are taking a hit at the pumps and hoping to make up the cost through in-store sales or in the case of Costco a combination of sales and membership dues. Those with higher prices are setting them within the generally accepted up to 10 cents per litre that is usually tacked on to cover station costs and profits.

Of course, there are factors that the public will never know because gas stations and their corporate masters are private businesses and really have no obligation to disclose their pricing strategy and any discounts in buying they might receive.

That being said, if Cochrane stations continue to be so much higher than those even a few minutes of town not only are customers going to start voting with their wallets and go elsewhere, it could have a very negative impact on our town. 

Tourists on roadtrips plan their routes based on the price of gas. Such substantially high prices at Cochrane pumps have the potential to hurt other community businesses as tourists steer clear to save money on fuel.

While private business have no obligation to disclose their pricing strategy and it might be true many city stations are accepting a loss on gas prices, it seems Cochrane stations have been hitting the upper end of the margin costs. Fortunately, at the end of last week Cochrane stations seem to have heard the message and prices have come down to near comparable levels to Calgary, though they are still higher.

While no one expects a business to lose money, they do expect to get a competitive price. That is business 101.




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