Automotive, Fuel Economy

Have You Been (Financially) Raped Lately? If You Live In Canada – Of Course You Have!

Road-Test.org

The price of oil began its downward spiral in July of 2014. From the end of June it started falling from $100 barrel all the way down to $45 in and around the middle of January 2015, it’s now rebounded a little to $52.

How have our gas prices fared over that period?

Let’s do some number-crunching…
At $100 per barrel we were in the $1.35-1.40/litre range for regular unleaded in Southern Ontario (add 17¢/litre for Super Unleaded).

In the middle of December 2014 oil was around $77 per barrel and gas was around $1.20/ litre in Ontario. Oil fell to $45 around the beginning of February and our local gas stations had finally brought the price down to around 90-92¢/litre. Oil climbed to $52 over the past week (middle of February 2015) and gas immediately shot up to $1.02.Road-Test.org, Gas Buddy.com

Meanwhile, across the border in Niagara Falls NY (where fuel taxes on gas are the highest in all of the U.S.), gas prices fell immediately as the price of oil dipped below $77, to $1.50/gallon (66¢/litre) and remained there until today. It’s still in the $1.40 – $1.49 range

By the way, Super Unleaded adds only 5¢ per gallon – ONE PENNY per litre to the price of Regular Unleaded – meanwhile, we’re paying 64.3¢ MORE per gallon for Super Unleaded – on top of the already diabolical price differential!

Road-Test.org, Gas Buddy.comAt $1.40 – $1.49 /gallon that equates to 63.4 – 65.7¢/litre. Last year they were paying in the region of $2.79/gallon (73.7¢/litre) while we were paying $1.33/litre with oil in the $100-110 barrel range.

Will the government do anything about this? NO way – they make too much money on fuel to care. In Ontario they take a minimum of 40¢/litre in taxes. If the price goes up, so do the taxes. Don’t look for any help there.

Collusion – Part 1
What about the ‘collusion’ factor that comes up every now and again – usually around voting periods…the governments have “looked into it” and found no evidence. Well if GM, Ford and Chrysler priced ALL of their cars at the exact same price and didn’t allow any haggling – would the governments’ find collusion then? I’m pretty sure they would.

When one company (Suncor) controls the refining of oil for almost all of Ontario and Quebec, they kinda set the wholesale price. When one oil company (conveniently the same one), owns the vast majority of the gas stations in Ontario and Quebec, they kinda get to dictate what the selling price is to the consumer. That’s why there’s no collusion – everyone gets told by one company what they get to sell their product for.

Road-Test.orgCollusion – Part 2
And herein lies the other part of the collusion formula – Oil is a commodity and is traded in the commodity exchanges around the world. When they announce the price of oil or corn or soybeans – it’s not the cost to buy it today – it’s the price 3 months from now. The only exception to that rule is precious metals (gold, silver platinum etc.).

When the price of oil falls from $100 to $77 over the course of 6 months it quite naturally takes 3 months for the price to drop, to work its way through the system – not 6 months or more as happens at the pump. The oil companies aren’t buying oil every day, they buy when it’s lowest, so they’d have ‘bought forward’ when it was at $45…probably an entire years-worth of oil, maybe even two or three years’.

Transversely – it doesn’t go up instantaneously either – except at the pumps. When the price of oil re-bounded this week – that was for oil to be purchased in MAY 2015, yet the pump price went from 90-92¢ to $102.6 in less than a week! That’s 10¢/litre (37.8¢/gallon) virtually overnight!! Across the border? No change what-so-ever.

Is what they do wrong?  No, they are a business and they are in the market to make money and pay dividends to shareholders.

So what do you think? Have YOU been financially raped lately? Every time you visit the gas pump you are!

What can you do about it?
Well for one, cross the border and buy your gas over there. I do that whenever possible. Fuel prices drop immediately when the price of oil moves downward, but it takes longer to go up – Americans are very passionate about getting the lowest gas prices possible and the market reflects that…it’s called competition.

Another option is to buy shares in Suncor. Every time they rape people at the pump, you’ll get a piece of the action – 4 times a year when they send out their quarterly dividends – which you’ll have to pay tax on.


Copyright © 2015 by Iain Shankland. All rights reserved.
Text / Images: Iain Shankland (Crime Stoppers)