With gas prices at record highs, why don’t we see more price wars?


VANCOUVER (NEWS 1130) – A new high around the Lower Mainland — the price of gasoline at $1.589 per litre — is getting drivers hotter under the collar.

There are still deals to be had, particularly in eastern Metro Vancouver and the Fraser Valley where there have been price swings of up to 16-cents per litre, but one industry analyst says you are unlikely to get a break at the pump in the rest of the region.

“You largely don’t see that kind of swing because there are fewer outlets in places like Vancouver,” says Roger McKnight, chief petroleum analyst at En-Pro International. “The population has increased, the independents or resellers in Vancouver have been driven out by high real estate costs, which elevates operating costs, and you are left with stations that are pretty much corporately run, mainly by Chevron, Esso, PetroCan and Shell.”

But he says in the outlying areas, such as Abbotsford and Chilliwack, there are more independent companies which creates more price wars, generated by competition.

“When you have unbranded resellers or independents in the marketplace, they tend to fight each other rather vigorously to maintain market share,” he says.

McKnight says competition is why there are more radical swings in gasoline prices outside the core of Metro Vancouver but not the widespread, aggressive price wars of yesteryear in other parts of the region. Those areas are also not subject to Metro Vancouver’s higher gas taxes.

Analyst Dan McTeague at GasBuddy.com agrees pricey real estate has put a damper on the region’s volatile gasoline market .

“Circumstances have also changed in that we don’t have a lot of direct refinery-owned gas stations who can use their refinery profits to offset their retail losses. We also don’t have a lot of new big box stores coming in and trying to gain a greater market share. It’s a very tough market,” he says, pointing out the Lower Mainland’s supply of gasoline is extremely tight. “That’s why we see prices move up and down in such a lockstep fashion.”

But McTeague says there are still deals.

“Usually in the evenings, prices might drop by three or four cents per litre. And on weekends it’s not the exception, it’s the rule that stations drop by three or four cents per litre. So you’re getting a bit of a deal but not much as what we are seeing in what I consider the ‘wild west’ in areas further east.”

According to GasBuddy.com, the lowest price observed at the pump in Vancouver Wednesday morning was $1.499 per litre. In Abbotsford, the lowest price was $1.389 per litre.

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