Gas Price Confusion

Thursday, 20 August 2015 06:14

Many people are feeling the squeeze at the pumps in Oxford County, but why are those prices so high?

OXFORD COUNTY - If you've been comparing gas prices in Oxford County with gas prices elsewhere, you might be feeling confused and frustrated.

You might be doubly confused if you've been travelling through London recently and noticed the difference in the price of gas. Senior Petroleum Analyst for GasBuddy.com and founder of TomorrowsGasPriceToday.com Dan McTeague says there's one very key factor at play in the cost. "The only difference is what's called the retail margin and that's the amount of money a gas station needs or allows itself to operate to pay for things like paying for electricity at the pumps, paying the staff, paying the mortgages, etcetera. What you're seeing in markets like London being led by big box stores like Costco is gasoline being sold as a loss litre." McTeague adds they aren't selling at a loss out of the goodness of their hearts - they make that money back through sales in their stores. This puts the mom and pop style gas bars in a difficult position as they struggle to keep pace.

Some people may still be scratching their heads - they assumed that as the cost of crude oil dropped we might get a bit of break at the pumps, but McTeague says it's more complicated than that. "We're paying about 13 to 15 cents a litre less than we did at this time last year, but we price all of our gasoline, all of our oil in US terms and that's part of the problem. Our main export is oil, was oil, and it's dropped about 2/3 in value since last year and brought the Canadian dollar down with it. That denies us about a 10 cent a litre bonus." We also have to rely more on gasoline markets, which according the McTeague don't have the same kind of supply and demand. "Oil is oversupplied - everyone knows how to make it, and thus the price has dropped. Not the same for gasoline."

But the big question remains - will we ever get to see prices dip back down? The answer? Tentatively, yes. Winter blended fuel is cheaper than summer blend, generally speaking, so we could see some relief when the seasons change. If crude continues to move downward it could also help prices improve, but that would only be true if the Canadian dollar improves. If the government introduces a carbon tax, which is being looked at, that would also have a negative impact on gas prices.

"No one knows exactly where gasoline futures are going to go," says McTeague. "There's an indication they'll go down, but there's no guarantee of that and of course with governments laying on more taxes and the Canadian dollar dropping as crude drops we might very well see where we are within 5 cents a litre; so as high as a 1.16, as low as a 1.06."

You can always check gas prices in Oxford County on the Heart FM Gas Prices Page