PumpTalk - Petro-Canada

Global Demand and Diesel Prices

We have had many questions come in to the PumpTalk blog regarding diesel pricing and why they continue to be above gasoline prices. In this week’s post, we’ll help answer these questions.
First, I’d like to remind everyone that diesel has more than one use versus its sister, gasoline, whose primary use is transportation. This means that, unlike gasoline, demand for diesel is based on more than vehicle population. Diesel has many other uses in industries like in freight, construction, agriculture and ports.

Now let’s shed some light on pricing.

WTI vs Brent Crude - What do they mean?

Photo: iStockphoto

When we're talking about oil prices, we see these two terms in the news a lot: WTI and Brent Crude. What do they mean - and what's the difference between the two?

Not all crude oil is created equal - different API gravity (an indication of the ability of the crude to make gasoline) and sulfur content, for example, affect the grade and classification of crude oil. WTI (an acronym for "West Texas Intermediate") and Brent Crude are two different classifications of crude oil.

How Pricing Works Around the World

So, you already know that there's variance in gas prices between Canada and the US, even by province and state. Local market conditions like size of market, processing and distribution costs, overall demand and competitive price play a large role. Looking outside of North America is an interesting exercise, and one that works well visually. Here's a cool map that shows gas prices across the world.

Image: http://flowingdata.com

Crude Oil, Gas Prices and So Much More

This week, I wanted to provide an updated view on crude oil and gasoline, and how prices are set. Michael Ervin is an expert gas analyst and although this Globe and Mail article is a couple years old, his responses to reader questions are extremely insightful and still hold true! He goes beyond this and also discusses diesel, the actual effect of boycotts and many other subjects.   Fascinating article: “Explaining Sky High Gasoline Prices” - hope you like it!!

- Erin F.

Photo: iStockphoto

Dispelling the myth about long weekend gas price hikes

One of the most common questions we still get as spokespeople at Suncor is: 

“Why does the cost of fuel go up right before every long weekend?”

For years, we have been telling our readers that it is simply a myth.  Now, thanks to a piece of research released this week by M.J. Ervin & Associates (a division of the Kent Group), a review of the pricing data around long weekends across Canada since 2006 has been completed.  (DISCLOSURE:  This work was done by M.J. Ervin & Associates on behalf of the Canadian Petroleum Products Institute (CPPI), to provide independent third party research. Suncor Energy is a member company of CPPI).

Gas prices go up and down, but what causes this? And how are prices set in the first place?

Crude oil is a commodity, like coffee or wheat, with prices set on global markets. Just as a poor coffee bean harvest can increase the price of your morning coffee, when something significant happens to the supply of crude oil or gasoline, prices may be affected. Local competition is a big factor too. If one site drops the price to get more business, other sites in the area may adjust their own prices to keep customers from going down the road. So retailers continuously monitor and adjust prices to remain competitive.

Crude oil is not the only factor in setting the price we pay at the pump. Wholesale gasoline is also a commodity that’s traded on markets, so local market forces play a significant role in determining the retail price for fuel. Another significant factor is taxes, which vary both within Canada and around the world. In Canada, every province and even some individual municipalities apply taxes at different levels, which can contribute to the regional differences you see at the pump. In the U.S., there are also federal, state and local taxes, but often at much lower levels than in Canada.

Let us know if you still have questions!

Sister blogs

PumpTalk was our company’s first foray into the blogosphere and we have since participated in other forms of social media. For instance, we've created Suncor Response, a blog that helps us convey information about relevant events we are responding to. Today, we have that site directed to our response to the situation in Libya. We also provide an online newsletter, Oil Sands Question and Response (OSQAR). In fact, a recent OSQAR post, Why it does matter where your oil comes from, talks about how the unrest in North Africa and the Middle East have once again reminded us how the price of gasoline is linked to both the demand for oil and the stability of oil supply.

Rising Pump Prices

Unless you don’t own a car, you’re probably aware of the increase in gas prices over the last day or so. I saw an interesting news article this morning on why the price has risen so dramatically and thought I would share it with folks out there in case you haven’t seen it either. It explains why the price has risen but if you want more information on how pricing is decided, then an earlier post on PumpTalk might give you some more context.

Observations of a fledgling gas jockey

In my first blog entry on Pumptalk, I wanted to address some comments made on recent posts. I’ve noticed a lot of the comments centre on pricing issues and our readers question whether prices are set competitively. For someone new to the industry, this really is an important issue – competition in our industry is vital as in every competitive marketplace. Although I hadn’t given pricing too much thought before I joined Suncor and in recently getting my first car, I now understand that our customers are extremely aware of what they’re paying in this area versus other parts of their budget. When you drive up and see those large numbers posted, they tend to take better hold of your attention than in a grocery as you collect item after item.

A Brief Conversation With Those Who Set the Price.

As we approach another summer long weekend, I’m sure many of us are hoping for great weather and good times with family and friends.  It also means that the rumour mill is starting to churn again that we need to plan ahead and gas prices are going to go up.   I’ve watched long weekend pricing more carefully now for a number of years, and have seen that yes sometimes the prices do go up; but just as often as not they pretty much stay the same or even go down.