Cornwall gasoline sold at loss before spike: analyst

A car lines up at the gas station pump on Brookdale Avenue in Cornwall, Ont. Wednesday April 12, 2017. A gas price analyst says the price spike was not only due to changing to summer formulated gas but for retailers to survive after selling petrol at a loss. (Newswatch Group/Bill Kingston)

CORNWALL – A petroleum analyst says Cornwall gas stations were actually selling their petrol at a loss before the province-wide price hike this week.

Drivers had a case of sticker shock, Tuesday, as the price went from 98 cents a liter on average to $1.17-1.19 a liter.

“For the past several days it’s (wholesale price) been in the $1.03 range…but the fact you were paying 98 or 99 cents a liter meant that you were getting gasoline below cost. That’s really remarkable situation where very few consumers have been able to take advantage of those below-cost prices,” said Dan McTeague, senior petroleum analyst with GasBuddy.com, in an interview with Cornwall Newswatch.

With the wholesale price moving to $1.09 a liter, McTeague believes retailers couldn’t stomach it.

“Retailers were confronted with increases in the price, their own price, pushing gas to $1.09. The prospect of losing 10 cents a liter every time you pump gasoline is just something, I think, most could not endure. So, one of the reasons you saw prices jump, wasn’t just the six cents a liter, it was also a recovery of the operating margins necessary for gas stations to survive,” McTeague said.

How can stations survive below-cost selling?

McTeague said small Mom and Pop stores can have dealer support. “In this context, the price you were paying at the pumps was really a good deal and it would have been even better had they kept the price today because of course you would be buying gasoline retail 10 cents less than what it costs them to buy and that, in my mind, is a free lunch.”

When prices spiked Tuesday, the Esso on Brookdale Avenue was still at 99 cents a liter, creating a lineup of cars.

McTeague also believes, like other medium-sized cities, Cornwall gas stations may have been trying to clear their storage tanks in order to meet the summer gas federal regulations coming April 15.

The so-called “summer gas” has a lower Reid vapor pressure (RVP) so that cars and trucks don’t end up with vapor lock engine problems during the summer. It also costs a lot more for refineries to produce – McTeague calculates it at six cents a liter.

The “summer gas” has to be sold until Sept. 15.

“There is a legitimate reason for it and there’s a legitimate cost for it,” McTeague said.

“Having said all this, I’m not going to apologize or defend the oil industry. The fact that it was passed on instantaneously is proof is what I try to fight as a Member of Parliament – the lack of competition among players. We’ve lost a lot of competitors. You guys lost one of your own back yard, OLCO, many years ago,” he said.

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