Is Revelstoke getting hosed at the pump?
Compared to neighbouring communities, Revelstoke’s getting gouged at the pump, Mr. Editor, so why don’t you do something about it?
High gas price complaints are one of the most common story suggestions I get. The complaint is often of a conspiracy or collusion designed to hose consumers. Locally, the idea is that because Revelstoke is geographically isolated, highway motorists are forced to fill up here before the jump over Rogers Pass – or in any other direction. Gas stations have all travellers over a barrel, but the ones that end up paying the most are Revelstoke locals. For example, we endured a months-long stretch of 129.9 cents a litre period before Christmas, and according to bcgasprices.com still live in the zone tied for the highest prices in B.C. This is despite the fact that Lower Mainland motorists pay an extra transit tax.
Most gas price complaints I get focus on the prices of gas in general. I’ll admit I approach those suggestions with a bit of a closed mind; I strongly doubt even the most revved up, high-octane editorial piece will force multinational oil corporations to take any notice.
But what about the local angle? As I’m writing this (Jan. 27) Revelstoke is paying 125.9 cents per litre, which is eight cents a litre more than Salmon Arm, and about 21 cents more than Kamloops. Why?
So, I spent the lion’s share of my time over the past week talking with stakeholders and experts about the issue. While I don’t think this story in itself will make much of a difference, it does present a roadmap of how residents can come together to affect change in the price of gas locally. If you organize and take action, it’s possible to get prices down so they’re competitive with neighbouring communities. Maybe.
The economist cites competition
Mariano Tappata is an assistant professor in Strategy and Business Economics at UBC’s Sauder School of Business. He’s authored a paper on pricing strategies and the retail gasoline market.
When his friends speak with him about gas prices, conspiracy and collusion come up quickly, but the economist said the price in local markets is most often influenced by a set of market factors.
Competition is a main one. A smaller market with fewer stations is less competitive. If one entity owns two stations, the market is even smaller than it seems (which means the new Petro-Canada planned for the lot next to McDonald’s won’t really be an ‘extra’ station, since the 7-Eleven is also Petro-Canada).
Another factor is the nature of the market. Big box retailers who operate a gas station on their lot often use the price of gas as a “loss leader” – meaning they break even or lose on the price of gas in order to attract customers. This brings the price of gas down in the entire market.
Local regulations that affect market entry also count. If zoning regulations or other local rules prevent or impede new businesses from entering the retail gas market, then less competition will likely result.
If local taxes are relatively high, the price will be passed on to consumers. Chevron, Petro-Canada and Esso pay between about $23,500 to $28,500 each for all local taxes, including their convenience stores. The Revelstoke Shell pays $84,976, including the Tim Hortons restaurant.
Tappata said the market conditions in a small town tend towards higher prices. “[The gas station owner is] going to try to charge the highest price possible. Let’s be honest; he wants to try to maximize his profits,” he said. “Because you’re a small town, you only have three or four gas stations, so it’s natural that prices would be up. … The reason why it doesn’t happen in some other markets is because the number of gas stations is large enough to generate competition, and competition is what prevents gas station owners from setting high prices.”
He recommended the city make sure the cost of entry into the gasoline retail market is as low as possible if lower prices is the goal. Tappata also notes that regulators and governments had studied the issue of gasoline prices for years, but rarely found a silver bullet. “In very rare cases, they found collusion, actual price gouging,” he said.
Tappata also said a gas station leaving the market could drive prices up. The Petro-Canada has been closed for a few years. The Super Save Gas stopped selling gas a few months ago.
Super Save Gas owner Matt Singh said he couldn’t compete as an independent because he’s forced to pay market prices. Company stations have direct deals with refineries. “It’s a vicious game,” Singh said. He hopes to sell gas again in the future.
The activist gets change
I phoned up ‘Jen’ from Merrittonians Against Gas Price Fixing! and was surprised to learn she is a former Revelstokian I interviewed before for an unrelated story. Jen Heard relocated to Merritt and joined a group involved in boycott protests of gas prices in Merritt in late 2012.
They argued prices there were much higher than in Kamloops. “Gas stations take advantage of highway motorists who think they need to fill up before heading over the Coquihalla,” reads the organization’s blog.
The group organized and called the oil companies to complain. “We kept getting standard responses from all the companies,” Heard said.
Unconvinced, they organized protests and invited their MP and MLA. They called in regional TV crews. “They told [us] to bring a whole bunch of angry friends,” she said of the November, 2012 protests that were broadcast on television.
They picketed gas stations and encouraged motorists to keep trucking to Kamloops before they filled up. “The biggest price drop was right after the first protest,” Heard said. She believes the protest lowered the price of gas in Merritt.
They did get some criticism. Some said the protests hurt local businesses. Heard disagrees. “Our intent was never to encourage people to shop out of town for anything other than fuel,” she said. As a post-grad student and mother of four, she watches every dollar, saying prices that were about 20 cents per litre cheaper in Kamloops incentivized shopping out of town. “People don’t really need an extra incentive to go shop in Kamloops,” she said.
She believes keeping gas prices low in Merritt would keep more locals shopping in Merritt. “I don’t think we’ve hurt local businesses,” she said. “It’s impossible to keep people in town with a free ride over to Kamloops.”
Heard said she’s an Enbridge Northern Gateway pipeline opponent and is not an advocate of low gas prices in general; she understands the uses of gas taxation. However, she’s convinced oil companies are taking advantage of small markets like Merritt, which only hurts locals.
The Merritt group is now looking for positive ways to influence the market. They’ve invited a gasoline co-op representative to give a presentation.
Gas prices incent local to shop out of town
Anecdotally, gas prices are thwarting local efforts to keep retail commerce in Revelstoke. The Revelstoke Chamber of Commerce has its Ten Per Cent Shift, but Kamloops has a 20-cents-a-litre kickback.
Revelstoke resident Rosemary Kelly is one of several who’ve requested the Times Review do something about local gas prices. “Why don’t you ever write about the gas prices in Revelstoke?” she asked in a Jan. 23 email.
“I was thinking of going down the street with a sign,” she said in an interview. “It makes me so mad.”
Kelly said the combination of lower gas prices in Kamloops and lower grocery prices make the trip worthwhile.
“I just think it’s the owners,” Kelly said. “Why is it still so up high? I think it’s just greedy. They don’t need to give me an explanation on that one.”
Resident worries about seniors, medical travel cost
Revelstoke resident Scott Gertzen is another who wrote to complain. The screenwriter spends a lot of time drinking coffee and writing screenplays at Tim Hortons in Revelstoke. He hears a lot of complaints from customers of the adjoined Shell station.
“A lot of them are railroaders, truck drivers and hockey [families],” Gertzen said. They travel around and know the prices are cheaper elsewhere – they throw jerry cans in the pickup and buy gas elsewhere when they can. “Are they taking advantage of snowmobilers who come into town?” he asked.
“The older people like my parents are stuck with it,” he said.
“If I was in better shape I’d probably run a protest,” Gertzen said. Medical issues forced the railroader to retire early. Now he travels extensively for treatments and worries about others like him who have to pay for gas for medical treatment.
Gertzen hopes raising awareness about the issue will lead to change. “You have to ask the question,” he said. “Or they’ll just keep it [up].”
Gas station owner not allowed to talk
I phoned Andrew Peacock, owner of the Revelstoke Shell station. I caught up with him at his Shell station in Salmon Arm. I had filled up at his Shell station in Revelstoke that morning, where prices were eight cents per litre higher. I wanted to ask why I paid $3.24 more for filling up here.
“I’m not allowed to discuss fuel pricing, especially with the media,” he said, adding pricing was done by Shell. “It’s more of what they decide at their end.” He referred me to a hotline. “You’re going to get the company line,” he said.
I called the hotline, but was referred to a website by a representative. I later called a Shell media line. The representative couldn’t answer specific questions, and advised me to write them down and send them in, which wasn’t possible by press time.
The Shell website is similar to web pages hosted by most major oil companies. They cite all kinds of reasons why oil prices fluctuate. The arguments are understandable, but don’t really answer why the prices in one market are the way they are. Fraser-Nicola MLA Harry Lali doesn’t believe the explanations anyway.
Politician encourages residents to organize, rise up
Lali joined the protests in Merritt. “It just doesn’t make sense,” Lali said of gas company explanations about why prices are so high in one market compared to the next. “It was really not explained very well by anybody.”
He said oil company explanations are “convoluted.”
“They make you feel like you don’t understand as an individual,” he said. “Oil companies don’t seem to be very good at explaining.”
Lali encouraged Revelstokians to follow the actions of those in Merritt. “You target one or two gas stations and ask them to go somewhere else,” he said.
Lali doesn’t believe picketing businesses is hurtful to the local economy. “It’s a red herring,” he said. “It’s going out of town right now. People were filling up elsewhere.”
Lali said he didn’t think some kind of added provincial regulation is the answer. “I don’t know if price controls would work,” he said. “We do live in a free market economy.”
Competition Bureau seeks formal complaint to investigate
Phil Norris is a spokesperson with the Competition Bureau, an independent federal law enforcement agency that “ensures that Canadian businesses and consumers prosper in a competitive and innovative marketplace.”
Norris said an investigation originating with the Competition Bureau led to an ongoing prosecution and scandal in Quebec that led to charges against 39 individuals and 15 companies. So far, 30 people and seven companies have been found guilty and hit with fines over $3 million. To date, sentences have totalled 54 months in jail. Individual gas stations involved included Shell, Petro-Canada and Esso stations, including several other Eastern Canada brands.
He noted ongoing hearings and prosecutions in Quebec and Ontario.
“The fact that retailers charge similar prices, that in of itself doesn’t constitute and offence under the Competition Act. We obviously need evidence,” Norris said. “Any type of conspiracy by their nature are very difficult to check and prove. It’s not the easiest thing to uncover.”
Norris noted ‘Section 9’ of the Competition Act, a complaint process whereby a group of six residents can come together and file a formal complaint. “They may apply to the Commissioner of Competition for an inquiry,” Norris said. “Upon receiving this application, the commissioner is required to commence and inquiry.”
Norris said it doesn’t necessarily mean a formal investigation, just that the commissioner will look into it.
“We will absolutely look into it,” he said. “We definitely, definitely encourage anyone who feels that there is anticompetitive behaviour in setting the price of retail gas or any industry to absolutely let us know, because that is one of the ways that our investigations start. It’s important that people do send their complaints to us.”
If they turn up wrongdoing, they can refer their case to the Public Prosecution Service of Canada, a federal prosecution body.
So, how did the Competition Bureau crack cases such as the major prosecution in Quebec?
“A lot of evidence is wiretap evidence,” Norris said.
Will Revelstoke protest?
Protests and formal complaints have led to investigations and reduced prices in other communities. Are Revelstokians motivated to make a change in their community?