It's Mid-January...Time For The Exciting Annual Review
Why I like the Gas Man (kind of)

Crude down. Pump Prices Up?

When talking about gas prices, I'm sometimes reminded of Goldilocks & the Three Bears.  While Goldilocks was seeking basic food and shelter, she deemed almost everything she found to be too hot, too cold, too hard, too soft, etc.  When she does find something she's happy with, it's fleeting...empty porridge bowl, broken chair, abrupt end to a nap...

The price of gasoline tends to fall into that same rut.  Never quite right and happiness is usually fleeting.  No, I'm not going to blame the bears.  They've had to endure enough.  When many factors combine to influence the price of a consumer good like gasoline, it's sometimes tough to understand if it's too hot, too cold, or just right.

As I've posted before, the final pump price for gasoline is influenced by many factors.  For examples, look here and here.  Yes, the price of crude oil is one of factors, but it's not the only.  Crude oil is the main ingredient in the gasoline recipe, which makes it an important indicator of where prices are going.  Think back to the dramatic drop in crude over the last 5 months and the effect it's had on the price you are paying to fill your tank.  But it's not a relationship that always works in unison.

Recently, wholesale gas prices have been rising, causing the final retail price to also rise.  Gasoline being a commodity, the wholesale price is largely determined by the markets and how they interpret the supply/demand balance.  As a Canadian oil company, we're price takers.

Also important for Canadian oil companies is the value of our dollar compared to the US Greenback (dollar).  Just as a trip to the outlet malls in the US costs you more when the dollar drops, so too does the purchasing power of those buying crude oil as it's priced in US dollars.  In recent years the dollar didn't fluctuate much so it wasn't much of a factor.  But just like everything else these days, it's faced some volatile times.  In the last few weeks we've seen swings of several cents.  When the Cdn dollar is high, like it was this time last year, we benefit with lower prices.  When the loonie is struggling, like it is now, it puts upwards pressure on the price of gasoline.  Natural Resources Canada has studied this relationship before.

So, while prices are much lower than they were just a few months ago, they are neither too hot or too cold.  They are just right based on the many factors that influence the final selling price.   For those who disagree with my Goldilocks approach, we all know what happened to her.  And not in the "sanitized" modern version of the story.

Editor's Note:  This post is to answer the comments I've been receiving on this topic.  Sorry for the delay in responding.

Comments

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Cliff

Wow what a snow job, I see why you are a PR guy. Keep up the good work and don't forget Petro Canada's motto. "First up last down"

Sophia

"When the Cdn dollar is high, like it was this time last year, we benefit with lower prices. When the loonie is struggling, like it is now, it puts upwards pressure on the price of gasoline. Natural Resources Canada has studied this relationship before."

I am sorry but that is the biggest load of bull I have EVER heard!!! When the dollar was high we did NOT notice a big break at the gas pumps. And why is it then, that 10 years ago (when oil was at about the same price it is now and the loonie was about where it is now) the price of gas was WAY cheaper. I think this is more about the Gas Companies and Government making as much money off of the people as they can.

Anita Lidven

I totally agree with Sophia.
Well done Sophia--you told them like it is--a rip off

Anita Lidven

Well done Sophia--I agree with you 100%--we are being ripped off good and solid

Cliff

Once again I see that the PR guys can't give us an honest answer to our questions without all the BS. Lets boycott the companies who lie to us, once they report their profit for the first quarter we will see who they are. The price here in Edmonton for the middle of Jan was 81.9 while the price of the barrel was below $35.00. Something is wrong with this picture.

Sophia

To be honest I am shocked that they are even posting the negative comments. We are know that the government, corporations, etc. hate being called on their BS. It bothers me that they have so little faith in the intelligence of the Canadian People. Unfortunately we can call them on their lies all that we want and it isn't going to make them care enough to lower the gas prices, food prices, etc. They make excuses and we are supposed to just sit back and accept that they are trying SO hard to eliminate the middle class. With the price on everything going up so high people will soon fall into two categories, the rich and the poor. Thanks Guys!

Jim

Canadians have to stop talking about boycotting Petro Canada and just do it. There are plenty of stations to get gas from. If you boycott Petro, I will bet dollars to donuts that magically you will see the price drop and it wouldn't take a week for this to happen.

Cliff

Here we go again, here in Edmonton prices have risen by another 4 cents a liter today. Since 6 Jan 09 Petro Canada has driven the price up by 15 cents a liter. All the talk by there spin doctors(PR) have done more harm than good. Try this for once be honest with us, its greed that drives you all to keep putting the prices up and nothing more. Remember your motto "FIRST UP LAST DOWN"

RICK CHARLES

BULL XXXX ON YOU PETRO CANADA ... YOU GUYS ARE JUST AS BAD AS THE ALL THE OTHER COMPANIES.....BANKS,INSURANCE COMPANIES,
INVESTMENT FIRMS,TICKETMASTER,MAPLE LEAF MANGEMENT TEAM,ENRON ,LINEMEN BROS.THE LIST IS TOO LONG IT'S ALL ABOUT MONEY AND NOTHING ESLE.. AS FAR AS I CAN SEE. I WISH I WAS WRONG.. eg.WHY IS THE PRICE OF GAS HIGHER AT ONE PETRO CANADA STATION THAN OTHER PC STATION TWO BLOCKS AWAY....

MAKES NO SENSE TO ME...

RICK

editors note: comment was edited due to language. Contents were not otherwise altered.

Jim

How about if I said boycott Esso or Shell would my comment then be allowed on this blog. You guys are a joke to think that your fooling the public. The oil/gas companies are in bed with the government and the only reason the prices are what they are is because the government doesn't want to loose the revenue. The government doesn't care about the tax payers the same way the oil/gas companies don't care about price gouging.

G Trueman

So... why are pump prices 6 - 8 cents higher in Toronto than in, say, Ottawa? Why are pump prices in Toronto higher than in New Brunswick and Nova Scotia, which until price regulation was brought in, was 10-15 cents higher than here? Sure, the NYMEX price of gas swings beyond Petro Canada's control, but the city-by-city price padding that we see now is simply gouging. Petro Canada, you used to be cool, we the public used to be proud of you. Now you're just hosing us like the Americans do.

Orive

How appropriate that this fabrication refers to another fairy tale. Give us some credit and call it like it is, "Jon".

This is a straight up cash grab in an industry where inter-company collusion is the accepted norm.

Elsa

Haven't read the posts on this site for awhile, but I see that Jon is still doing his spin-doctoring. But, then, it's a job isn't it and in these tough economic times we all try to hold on to our jobs.

Let's face it, the oil companies truly resent charging us less than $1.00 per litre. Spring is near and they are slowly edging the prices up so that they can hit us with over $1.00 per litre. They are getting away with it, because the larger population is not complaining over these prices because they are lower than the $1.50 we were paying a few months ago. They are actually immensely grateful to be paying these prices despite the fact that they are still highly over-inflated. The social psychologists within the oil companies understand human behaviour. But there are still a lot of us out there who can do the math and have some understanding of the psychology of buying and you're not fooling us.

Why not get rid of the greed and charge us in the 60 cent range. You would still be making a decent profit and maybe you would even help the economy get back on track. But, perhaps that's not on your agenda.

tracy

Gas companies always talk about the wholesale price of gas going up. Well today on the nymex it is 1.20US a gallon. In Manitoba, we are paying .84 cents a litre. If this is supposed to be a joke, I'm not laughing. This is a pure cash grab by a bunch of suits on Bay Street who don't pay for thier own gas anyway.

Jim

I have stopped buying Petro gas, there is no reason the gas price should be this high. Plain and simple to see it's driven by greed. Being a Canadian Co. and the times what they are you would think that they would understand and want to help our slumping economy. It's really sad when a Canadian company is in position to help and they refuse, what does that say about our future as a Country.

Cliff

OMG, here in Edmonton today gas dropped by 3 cents a litre and Petro Canada was the first to lower it. Still they where the first to raise it by 15 cents a liter ove a six week period starting in Jan 09. One thing I have noticed is Jon the PR rep has not replied to any of our concerns. Does not surprise me once the people got onto their case about the gouging. Remember people Petro Canada's motto " FIRST UP LAST DOWN"

Jim

I wonder is there another board that actually gets looked at or that people pay attention to. Something has to get done, we know the Government won't do anything, we know that Petro could care less. Posting on this board really is nothging more than a few of us venting and who cares about that. Any other boards out there!

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