Gas Prices a monopoly with the government’s blessing

About seven years ago I used to live in a condominium unit on the corner of Dixie Rd. and Bloor St. in Mississauga. On the opposite corners were two gas stations, a Petro Canada and a Sunoco. I had a Sunoco card so I was a loyal customer to the north east corner establishment but where I was blessed was the daily price wars that I was able to observe and benefit from.

Throughout the day, the gas price would drop at the Sunoco in relation to what the Petro Canada price was. Usually the Petro Canada would set a price and the Sunoco would beat it and then eventually the Petro Canada would lower its price as the line ups grew across the street. This would go on until about midnight and then the price for the next day would be set only to have the war begin again usually by noon the next day.

I soon learned that by waiting until the end of the day, just before I wanted to head off to bed, I would benefit financially by then going out and filling up my tank.

It even became more structured that the price would go up Monday afternoon and slowly decrease the rest of the week only to rise dramatically Thursday at midnight for the Friday morning drive in to work and the inevitable weekend rush.

Around this time there were websites such as torontogasprices.com that had people submit what the price was at their local station so that drivers could search for the lowest gas price in the city.

Somewhere along the way things changed.

In the aftermath of Hurricane Katrina in August of 2005, gas companies began to increase the price of gas considerably due to fears of a shortage over the damage in the Gulf of Mexico. Motorists were screaming at government over the almost 30 cent a litre increase in gas prices within a ten day time period. The Federal government in charge at the time was the Liberals and having chaired the Liberal Government task force in 1988 on gas pricing practices, Liberal MP Dan McTeague took it upon himself to challenge Canadian refiners over the price increases.

This I believe is where a secret agreement was created.

Soon after McTeague stepped in, gas prices seemed to stabilize throughout parts of Canada. Friday was no longer the day that prices went up, they started to rise on a Wednesday. Dan McTeague began his own public service of providing through his secret formula of calculations on his website, what the gas prices would be the next day through the major regions of Canada. He would announce on his website by 4pm whether the price was going up or down at midnight and major media outlets would announce the info to the public. The thinking was, if the public knows in advance that an increase of 2 or 3 cents a litre was coming the next day, the public would have the opportunity to fill up and avoid the jacked up rates.

This was all fine and dandy except for one thing…where did all the competition go? There was no more ‘lowest price’ in Toronto as every station in Toronto had the same price. Be it Sunoco, Canadian Tire, Petro Canada, Esso, everyone’s price was the same.

How could that be? Over the last 5 years, every company has had identical gas prices without ever starting a price war by being slightly lower than the competition.

Was there a deal struck up years ago between the Liberal government and the gas companies to appease the public? I have sent requests to Dan McTeague’s office as well as my own MP’s office but only left with notices that tell me someone will get back to me.

McTeaugue has stated publically that takeovers at Canadian refineries has made the wholesale market uncompetitive so prices have remained similar from company to company at the retail level.  He has also been quoted as saying “you don’t need price fixing when you, in fact, have no competition”.  Esso, Sunoco, Petro Canada, Canadian Tire, Shell…there’s 5 companies, are we suggesting that none of them want to make more sales than the other? If the five biggest gasoline retailers have the same prices and never differ, is that not collusion? There are five major banking institutions in Canada, all with different rates for loans, mortgages and GIC’s; they remain in competition…how come five gas retailers don’t?

The Competition Bureau has investigated and never found any evidence of collusion but based on the facts, is it any wonder why the public remains skeptical?

In a Toronto Star article from 2009, a Petro Canada spokesperson Jon Hamilton was quoted “He’s (McTeague) spent the time and done the homework, he’s figured out some things”. Yes, I contend that he figured out how to deflect criticism of their pricing practices by throwing a bone to the consumer by divulging the price ahead of time. As for his ‘calculations’ for prices, I suspect that he gets a phone call every day from someone informing him of gas prices rising or falling.

The websites that helped find the lowest prices are still out there but they have evolved to more of an information website tracking the price trends as opposed to looking for the lowest prices in Toronto. The public seems content now knowing in advance what the prices will be and can fill up accordingly but I still wonder. Will we ever have price wars between gasoline companies that benefit the consumer? Or has the Federal government joined in the monopoly of setting gas prices to keep their profits flowing.