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  #61  
Old 04 July 2014, 02:09 PM
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Latiam Latiam is offline
 
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Originally Posted by lord_feldon View Post
Gas markups are pretty low already. Lower prices mean taking a loss, which would be pretty stupid when the demand for gasoline isn't all that price-sensitive. In the long term, people can change their habits, but nobody is going to decide not to go to work tomorrow because they woke up to find that gas went up 10 cents.



Information travels quickly in 2014. Why wouldn't the gas stations all be notified at about the same time that the price they're paying for the stuff in their tanks went up?
It's not about the same time. It's exactly the same time. And there's a site called "Tomorrow's gas prices today," apparently, because whenever it's going to jump more than 3 cents a litre it's on the news on CBC Radio One, presumably so you can fill up tonight.
Gas is more expensive here than in the States. I don't want to start a huge comparison with everyone, but I drive an average car AFAIK and it cost me $80 to fill up yesterday.

Also, as of last year the taxes on gas were 30.6 cents a litre in Ontario. Were the highest province, but they're all roughly the same. I'd call that a pretty high "mark-up" even if the money's going into the government's hands and not the station's. I can't find information easily on the markup from the Petri companies, likely because it changes so often. But yes, the station's markup is only around 1.5%.

Last edited by Latiam; 04 July 2014 at 02:23 PM.
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  #62  
Old 04 July 2014, 02:20 PM
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lord_feldon lord_feldon is offline
 
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Originally Posted by Steve View Post
Do people get this way about commodities like gold, or about foreign currencies as well?
I've heard it about gold, but with the price being kept down rather than up. President Maobummer is doing it to hide the true scope of inflation. Or something like that.
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  #63  
Old 04 July 2014, 02:33 PM
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And then the competitor makes his prices even lower than that, and soon everything is given away for free. Or of course, maybe prices for a commodity reach a fixed level quickly.
I won't tell you that because things like loyalty cards and coupons wouldn't exist in a perfect free market, so those 2 things are bits of evidence that companies have small amounts of monopoly power. But using the price change as evidence of price -fixing makes no sense since companies are just getting the same information on supply and responding to it at the same time.
I wonder how long the documented cases of price fixing that have occurred in different regions of Canada went on before charges were actually brought. I'm sure there were a lot of people using arguments like yours to excuse and explain what was going on, when what was actually going on was price fixing. I'm sure there probably were a fair number of people being mocked and being accused of not understanding the market. Until, as things turned out, it was found that they were right.
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  #64  
Old 04 July 2014, 02:40 PM
Steve Steve is offline
 
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You know that one article you presented as evidence of price fixing is making the same argument I'm making, right?

http://business.financialpost.com/20...fixing-scheme/
Quote:
Such schemes are difficult to detect, the Bureau said, as high or identical prices are not necessarily evidence of criminal activity.
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  #65  
Old 04 July 2014, 02:50 PM
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UEL UEL is offline
 
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Originally Posted by Latiam View Post
Also, as of last year the taxes on gas were 30.6 cents a litre in Ontario. Were the highest province, but they're all roughly the same. I'd call that a pretty high "mark-up" even if the money's going into the government's hands and not the station's. I can't find information easily on the markup from the Petri companies, likely because it changes so often. But yes, the station's markup is only around 1.5%.
You might call it markup, but those are taxes. GST/HST on cola is considered a tax and not a markup by consumers, so it is a bid odd that it is considered markup on fuel.

As I stated before, and I checked for Ottawa, most fuels delivered to a region in Canada come from a single distributor. That distributor controls the wholesale price for the gas sold to all the drivers across the whole region (in Ottawa, it is Petro-Can, believe it or not). So if the distributor raises prices by 3 cents per litre, every gas station in town will likely raise it by 3 cents per litre at the same time.

Plus, by your 1.5% station markup, even at today's price here 133.9 cents per litre, that gives the station 1.98 cents per litre as their margin (considerably less than when I was pumping gas years ago). Not much of a margin if they have to profit from their fuels. Your $80 fill up yesterday netted the station $1.19 in profit. Pretty slim.

So, despite my hating the fuel prices, it is not the station owners I need to look at for problems in pricing. They are working off such slim margins that they oftentimes have little to no control over their pricing (won't get into franchise versus brand owned stations).
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  #66  
Old 04 July 2014, 02:57 PM
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Alarm Alarm is offline
 
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Why does the price of gas change, when the cost of the gas in their underground tanks has already been determined and paid?

There's war in the middle east! Raise the price! But you (the retailer) have already paid for that gas... at the lower price. This isn't market actions making the prices fluctuate.

And the taxes? Everyone pays taxes. The price of cigaretttes doesn't fluctuate on a day to day, hour to hour basis and they are also subject to extra taxes and tariffs. So why do gas prices go up and down (mostly up) all the time?

ETA: To make it clear, I'm not arguing with you, UEL, about the station owners. They aren't making money. I used to know a station owner and he wasn't rich. As you stated, though, in eastern ontario, there's one (1) distributor. Is that not the definition of a monopoly? That's where the problem lies. There's not a real "market", despite all the claims that the prices are set by market forces.
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  #67  
Old 04 July 2014, 03:00 PM
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Latiam Latiam is offline
 
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No, definitely not the stations. I found a breakdown in price and tried to edit it in but missed by one minute.
In case you're wondering why I'm not just linking, it's hard to do on an iPod.
Anyway, this is a breakdown in 2012 of I think Ontario:


Crude costs 41%
Refiner Operating Margin 23%
Marketing Operating Margin 5%
Provincial Excise Tax 11%
Federal Excise Tax 8%
Provincial Tax 7%
Federal GST/HST 5%

The people in BC have it worse than us anyway. I was just saying that low markups by the gas station do not equal low markups and that someone in Ohio might not know the price of gas in Ontario.
If you want to see the article it is called "Price of Gas Tax in Ontario."
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  #68  
Old 04 July 2014, 03:04 PM
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UEL UEL is offline
 
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Quote:
Originally Posted by Alarm View Post
Why does the price of gas change, when the cost of the gas in their underground tanks has already been determined and paid?

There's war in the middle east! Raise the price! But you (the retailer) have already paid for that gas... at the lower price. This isn't market actions making the prices fluctuate.

And the taxes? Everyone pays taxes. The price of cigaretttes doesn't fluctuate on a day to day, hour to hour basis and they are also subject to extra taxes and tariffs. So why do gas prices go up and down (mostly up) all the time?
First, as I posted before, the station owner does not own the gas in the tanks underground. The second the owner purchases it is the second it is pumped into a vehicle. Until then, it is still the property of the distributor. This definitely makes it easier when gas is contaminated. So, the retailer does not have to pay up front for the 150 000 litres of fuel sitting below ground.

And taxes rarely change on fuel. HST remains the same. Fuel tax remains the same. The only thing changing the price on daily basis is the fact that fuel is priced by market forces at the distribution end.

I'm not saying that collusion does not occur. I'm just trying to say that it is not at the service station end of the business where "price fixing" occurs. There is too slim a margin and too great a risk for market fixing to occur at that level. I suspect that if there is collusion, it is at the level above distributor (major refineries and at the corporate levels, even internationally).

However, if you want to know about other problems at the service station level, I can fill you in quite nicely.

ETA: Got you Alarm. Monopolies are hard to break when it will take multi millions of dollars to set up a parallel set of infrastructure that can be environmentally risky just to drop the price of fuels by a few cents per litre. But even then, I don't think it is the distributor that is the problem.
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  #69  
Old 04 July 2014, 03:08 PM
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UEL UEL is offline
 
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Originally Posted by Latiam View Post
I was just saying that low markups by the gas station do not equal low markups and that someone in Ohio might not know the price of gas in Ontario.
Got it. You found a good little document. The refiner and marketer markup are interesting. I wonder how much of that markup goes to cover refiner and marketer costs?
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  #70  
Old 04 July 2014, 03:09 PM
Steve Steve is offline
 
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Quote:
Originally Posted by Alarm View Post
Why does the price of gas change, when the cost of the gas in their underground tanks has already been determined and paid?

There's war in the middle east! Raise the price! But you (the retailer) have already paid for that gas... at the lower price. This isn't market actions making the prices fluctuate.
Actually, that's exactly what market actions making the prices fluctuate would do. Current supplies are the only thing that prices take into account. They also take into account future flows of supplies.

Or think of it another way. Once you've paid for a commodity, it stops responding to ordinary supply and demand? Why? If I was selling an old gold necklace I'd try to sell it at its current market value, not at the price I bought it for.
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  #71  
Old 04 July 2014, 03:22 PM
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Sylvanz Sylvanz is offline
 
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UEL is *correct. The company I work for gets their fuel from exactly the same supplier as everyone else. I do not know the name of the supplier but I know that this is true. Our station and our company have very little control over gas prices. That's why most stations now are convenience stores because making enough money to stay afloat on the sale of gas is impossible because the margins are so close.

There is a franchise owner in town that has decided that he is going to "show (my store)". Our company policy has always been 1 penny below brand. Every other station in town is "brand", franchise. He, apparently, took exception to that, and the fact that we do about 10x the business of any other station in town. Anyway, he started a pricing war with us. He would push us to the point where we would be below cost and changing that $#%^ sign 5 and 6 x a day. Finally the front office decided enough was enough, and we stay the same as brand in this town only.

Before all of this we did a price survey twice a day and usually dropped a penny until something would happen to make us go up. The saying is down like a feather and up like a rocket. Now we do surveys that are impossible to keep track of because the head office changes their minds constantly. Our margin of profit is very very slim, we really don't make much money from gas.

Remember, we have to pay for it too as in the company, the station and the people that work there. I've seen our P&L's and gas is the least profitable thing we sell. When the price is high is when we don't make money on it (or when we were in that impossible price war). That's when my bonus gets really small. And the profit sharing bonus thing holds true for everyone in the company including the owners.

*All of this, but I don't really know about Canada's pricing. However, from what UEL says it sounds pretty much the same.
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  #72  
Old 04 July 2014, 03:33 PM
RichardM RichardM is online now
 
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Quote:
Originally Posted by Alarm View Post
Why does the price of gas change, when the cost of the gas in their underground tanks has already been determined and paid?
Because you have to be able to pay to get more gas to put in the tank. It has been too long since I took a basic economics course but this is called either Last In, First Out or maybe the exact opposite. Anyway for an extreme example, assume gas costs $1 per gallon or liter at the wholesale level and retails for 25% more. The underground tank holds 10,000 units. When you sell it all, you have $12500 in hand. Of this, you have to spend $10000 to refill the underground tank if the price hasn't increased. Assume gas goes up to $1.50 per unit at the wholesale level by the time you get ready to refill your underground tank. Then you have to spend $15000 to refill the tank. But you only have $12500 from selling the previous tankful. Thus you can see that instead of selling gas at what you paid for it, you have to sell it for what it will cost you to replenish your stock. This is true of retail business no matter the product. Thankfully 50% price increases over a very short time frame are reasonably rare.
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