Are Airdronians getting gouged at the pumps?
Some residents seem to think so, as Airdrie’s gas stations have maintained a price of $1.06 per litre for regular-grade gasoline for several weeks – despite lower prices being offered in other nearby communities.
Airdrie resident Cheryl Dryden said she has noticed the current price, which is a few cents per litre more than most gas stations in Calgary, has stagnated.
“My big question is who sets these prices,” she said. “Why aren’t they looked after a little better or kept control of? I know Calgary was down to 95 cents [per litre] for months. I just don’t understand why little old Airdrie – which isn’t so little anymore – is being gouged so badly. I guess I’d like to know who sets these prices and why they aren’t looked at a little more often.”
Despite living in Airdrie, Dryden said her family tends to fill up their tank at the Costco in Balzac, which is currently offering regular-grade gasoline for just 92 cents a litre.
While she typically tries to support the local economy, Dryden said with gasoline, it just makes more sense financially to fuel up outside the city.
“I know Costco is the low end of the spectrum, but still, it’s five minutes away,” she said. “We can go there, or we can go to Crossfield and it’s cheaper, or even Carstairs, where it’s cheaper.”
When contacted, managers of four gas stations in Airdrie said they do not choose what price to set their gasoline at, stating their parent corporation informs them what to set their prices at each day.
Dan McTeague, the president of Canadians for Affordable Energy and a former analyst for Gas Buddy, said there isn’t anything out of the ordinary about Airdrie’s current fuel prices.
“It really comes down to retail margins and not much else,” he said.
McTeague explained gas stations purchase their gasoline at a wholesale price, which for Calgary and area is currently 60.5 cents per litre. He said provincial and federal taxes, coupled with the federal carbon tax and the goods and services tax, bump that price by an additional 35 cents per litre.
“It’s costing gas stations just under 95 cents a litre to buy gasoline,” he said.
According to McTeague, gas stations try to set their prices at a rate that would provide them a retail margin of more than seven cents per litre. With a purchasing cost of 95 cents right now, he added selling regular-grade gasoline for anything less than 99 cents a litre would net Airdrie gas stations a retail margin of less than four cents per litre.
Taking the cost of honouring all credit card types into account, McTeague said, loses gas stations an additional two cents a litre of revenue.
“So now, your retail margins are two cents a litre,” he said, adding this would not be enough to support a gas station’s bottom line.
“It doesn’t matter if you’re in Calgary, Airdrie or anywhere around,” he said. “Selling gasoline at 99 cents a litre, like some places in Calgary, mean your retail margins are about four cents a litre. It means if you’re moving 20,000 litres a day…you’re lucky to make $400.”
Gas stations in Calgary selling their regular-grade gas for less than stations in Airdrie may be making up for the lower profit margins in other ways, according to McTeague, such as raising the cost of supreme- or premium-grade gasoline, or increasing the mark-up on items sold in the store, such as bottled water.
“Sometimes, sales of premium in cities like Calgary are used to cross-subsidize the near loss or lack of money being made by selling regular,” he said. “That’s a big factor and one way they do it.”
As for how Costco can afford to sell its regular-grade gasoline for just 92 cents a litre, McTeague said there are a few reasons. First, he said refiners tend to provide Costco a discount, due to the sheer volume of gas the company is able to sell.
“One of the [Costco] stores, rather than selling 20,000 litres a day, they might be selling 50,000 or even 60,000 – go to any Costco and you’ll see the lineup,” he said.
A second reason, according to McTeague, is because Costco doesn’t have to honour all types of credit cards, which other gas stations are required to do – a fee that adds a few cents to their overall price of gas.
“It’s not an uneven playing field but it certainly demonstrates there are variances when it comes to gas being sold at gas stations in heavier, bigger markets like Calgary versus markets that have big box stores that can pretty much sell their fuel at cost,” he said.
Scott Strasser, AirdrieToday.com
Follow me on Twitter @scottstrasser19
