I'd like to try something I was discussing with a colleague this morning.  With pump prices dropping significantly in the last few weeks and some large overnight price drops experienced in some larger markets, I'm going to pose the same questions that were asked/yelled when prices went up.  But instead of rise or go up, I'll simply substitute drop or dropped to reflect the current situation.

Here goes:

• Why should gasoline prices drop just because crude oil prices dropped?
• Why did gasoline prices drop today because crude oil prices dropped?  Doesn't it take 30-60 days for that crude to be refined?
• If it's the same gasoline that was in the storage tank yesterday, how could you drop the price at the pump?
• Why should Canadian pump prices also drop just because American wholesale prices dropped?

Gas prices go up and down for a number of reasons that have been answered here, here and here.  But by asking the same questions on the way down that were asked on the way up, it becomes obvious that the markets and local competition have a big influence over the price at the pump.  Problem is, those questions don't get asked.  Except when the price goes back up again.

In other words, if I understand that my pant size willl go up when I consume more doughnuts and hamburgers, shouldn't I also be able to figure out the path to a smaller pant size?   

Photo Credit: Kazze

Looking back at some of the comments after the Hurricane Ike post, it's obvious there is still some work to do in explaining the three main factors that make up the price at the pump.  I compared the three layers - crude oil, wholesale gasoline and local competition - in a post last year to a club sandwich.  The picture of the big bacon-filled sandwich alone is worth a look.   But let me take another crack at it.  This time, using another of my passions - Rock n Roll.

In the last week we have seen gas prices rise and fall quite dramatically.  As a result, the events surrounding Hurricane Ike have generated a lot of discussion on this blog and in many other arenas.  Much of the discussion revolves around the impact of the markets on the price at the pump.  Like in anything, not everyone agrees. 

A few years ago, Hurricane's Katrina and Rita unleashed a path of devastation and human tragedy that is still hard to fully comprehend to this day.  As we all learned through that event, the US Gulf Coast is home to a large portion of the American refining sector along with many oil platforms.  In the days that followed, gas prices rose and many accusations were leveled against the industry.  This site didn't exist then, but I did many media interviews to try and explain what was going on and respond to the accusations of unseemly behaviour.  As we all know, pump prices came back down and most people moved on.   

In the days that followed, two reports were issued on the subject with little fanfare.  One from the Competition Bureau of Canada and another from the Federal Trade Commission in the US that are worth looking at, especially in light of the events of the past week.  Please read on.   

Gasoline prices have risen as the markets appear to be reacting to the impact Hurricane Ike is having on the Texas Gulf Coast, even before it reaches land.  That has raised a number of questions, which I can certainly appreciate.   So I've attempted to answer the Top 5 questions in the post below. 

We have made great progress over the last week executing our plan to replenish inventories and improve our ability to serve our customers.  That plan includes a fleet of trucks, rail cars and Cat Cracker production from the Edmonton Refinery.

As we have been moving product from Vancouver eastward for some time, we have seen the earliest progress in the interior of British Columbia.  The vast majority of sites that were out of gas in British Columbia have now received shipments and should be back selling gasoline again.  We still need to build inventory levels, so we’re not back to business as usual, but customers should be able to get gasoline and other goods at their local Petro-Canada.

Customers in Alberta will have noticed a number of Petro-Canada stations that were displaying zeros on the price sign are selling gasoline again.  While we have made good progress replenishing inventories, we still have more work to do.   

There is only one way to deliver gasoline to a service station – by truck, and that takes time, drivers and a lot of kilometres.   As the gasoline situation has improved, we have added more Petro-Canada sites to our distribution lists and reduced the number of stations in the region that were out of gasoline by more than half.

Our efforts to replenish inventories continue and we are pleased with the progress we have made so far.  As sites have opened up the gas bars again, we have also been pleased to see many of our customers  return to fill up their tanks.   The patience and understanding expressed by our customers over the last few weeks is fully appreciated as we continue to work our way through this situation.   

Jon Hamilton

Photo Credit: cdwaldi