Part 1: Many factors go into high gas prices, analysts say

When gas prices dipped to $1.25 per litre earlier this week, drivers were seen lining up at several local gas stations to get their hands on what they considered to be cheap gas.

But was it really such a bargain?

Roger McKnight is a former oil executive and current industry analyst. He says gas prices in the Kitchener area are about the same as they were this time last year – but other factors point to gas companies getting a much better deal from that price.

“The price of crude a year ago was $106 (a barrel) and today it’s $90,” he tells CTV.

“The oil companies are being very quiet, because they’re making 50 per cent more profit on the refining margins than last year.”

Oil companies say it’s not such a cut-and-dried calculation. The Canadian Fuels Association says retail prices only match up to rises and falls in crude oil prices over time, not immediately.

The association also points to wholesale costs, retail markup and taxes as reasons for high prices.

Thirteen years ago, Jason Toews found himself in the same position as today’s drivers – frustrated with rising gas prices and baffled as to why they were doing so.

That’s when he decided to start GasBuddy, a website dedicated to helping consumers find the cheapest gas prices.

Toews says he sees some justification for current high gas prices, chalking it up to annual issues.

“This time of year, more of a factor is the supply of retail or refined gasoline,” he says.

“A lot of refineries do maintenance this time of year, taking part of the capacity offline as they get prepared for summer driving season.”

McKnight says current high prices can be explained best by looking at the political climate south of the border.

“What’s driving things right now is political uncertainty in the United States with their budget problems,” he says.

 

Part 2: Gas taxes cost families thousands, Taxpayers Federation says

Eliminating federal and provincial taxes on gasoline could save drivers significant money, says the Canadian Taxpayers Federation.

“About 30 per cent of the price you’re paying is actually tax,” says Candice Malcolm, the group’s director for Ontario.

According to the group, tax rates on gasoline average 28.7 per cent across Canada – costing the average two-vehicle household an estimated $1,225 per year.

The highest levels are in Quebec, at 34.6 per cent, while Alberta brings up the rear with tax rates on gasoline only hitting 21.5 per cent.

At 30.6 per cent, Ontario is closer to the top of the pyramid.

Breaking down the numbers even further, a gas retailer may decide to sell gas at 92 cents per litre. But with Ontario’s 11 per cent gas surcharge and 8 per cent HST, along with the 13 per cent federal gas tax, that number jumps to $1.31 per litre.

The provincial tax and HST are subject to the federal tax – a situation which angers the Canadian Taxpayers Federation, who are collecting signatures on a petition to send to the federal government.

“Our major issue is the tax on tax,” says Malcolm.

“It’s unethical. It’s wrong. We shouldn’t be paying a tax on a tax we’ve already paid.”

But some drivers pin the blame for high gas prices elsewhere.

“I still think the oil companies are controlling everything,” says motorist Ron Demptser.

“I don’t think we really have a choice. We have to pay for it.”

Gas prices in Kitchener and Waterloo ranged from $1.21 to $1.30 per litre on Wednesday, according to KWGasprices.com.

 

Part 3: Small measures can make big difference in gas spending

 

Oil companies and government taxes often take the blame for high gas prices, but industry analysts say there’s often a simpler reason for increase – one found just across the street.

It’s called ‘binocular marketing’, and it involves retailers adjusting their prices to ensure their closest competitors aren’t making any more money than they are.

“One retailer will just look down the street and see what Esso or Shell are doing, and report to his office that that’s what the price is going to be,” says analyst Roger McKnight.

It’s a pretty hard system for consumers to crack, but there are some ways drivers can still find deals at the pump.

Typically gas retailers only pay attention to competitors situated closely nearby when engaging in price-matching. That means discrepancies can still be found from neighbourhood to neighbourhood.

“Stay away from the more affluent areas,” suggests GasBuddy founder Jason Toews.

“Typically there’s fewer gas stations there, with higher prices.”

In Kitchener, one consumer says the best bet for cheap gas is to head east.

“I go down to Victoria Street,” says Boat Hurley.

“Sometimes they’re four or five cents cheaper from one garage to another.”

Others suggest going online is a good way to find the best deals on gas.

Sites like GasBuddy, OntarioGasPrices and Tomorrow’s Gas Prices Today report daily prices at various locations, and attempt to predict the next day’s prices.

There are variances between cities too. Dan McTeague of Tomorrow’s Gas Prices Today says Kitchener retailers like to sell fuel with a markup of about six cents per litre, but in Stratford, stores willing to take more of a financial hit have forced those margins downward.

“You see that six or seven-cent margin being completely eliminated by big box stores who can afford to sell gasoline at a loss,” he tells CTV.

Other methods suggested to save on gas include keeping tires properly inflated, maintaining the car’s engine and spending more time out of the car, using other modes of transit.

Analysts are predicting a slight increase in gas prices over March Break. McTeague says prices could jump four cents per litre in early April.