How Pricing Works Around the World
August 18, 2011
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.
In this graphic, it looks like our neighbours across the pond in Europe are among those hardest hit, paying much more that we do in North America. Why is this? The main thing it comes down to is government involvement - the way they're involved and how actively they are involved. For some of the countries on the overall list, gasoline is subsidized by the government. In many countries, it is either deregulated or heavily taxed. For most European countries, high fuel taxes are required in order to create attractive and viable public transit systems. This heavy taxation may change behaviours; it encourages drivers to employ public transit, seek out other vehicle options (smaller vehicles, alternative fuel requirements) and manufacturers to develop them.
For further reading, here's a link that compares individual countries more closely: www.kiplinger.com: Gas prices around the world
For further reading, here's a link that compares individual countries more closely: www.kiplinger.com: Gas prices around the world
- Erin F.
Can you explain why the price difference between regular octane and premium is much higher in Canada?
It's $0.20/gal in the US (aprox $.05/L) yet in Canada its from $0.11-15/L?
Posted by: Ron345 | August 24, 2011 at 11:12 AM
Hi Ron,
Thanks for your question. The variance you see between Canada and the US will vary greatly by province and state. Local market conditions like size of market, overall demand and competitive price play a large role. Price differentials for high grades vary between markets in Canada and between brands and sites within the market just as they do in the US. In general, high grades cost more because they have more expensive blending components and in most cases, a higher concentration of additives. There are also additional infrastructure costs associated with storage, distribution and dispensing costs associated with high grades. These fixed costs are incurred in both Canada and the US markets but smaller volumes and greater distances from supply points in Canada can result in higher cents per litre costs. Variable rate taxes also add to the price of higher grades in Canada.
You can also check out the blog post: "Premium Plus - A High Octane Story" http://www.pumptalk.ca/2008/07/premium-plus.html
Posted by: Pump Talk | August 25, 2011 at 04:05 PM
Thanks for the response. However most of the above reasons apply to both the US and Canada.
The fixed costs/higher taxes divided by a smaller population/(volume) is a reasonable point and to generally explain higher prices in Canada than the US.
However it does NOT EXPLAIN why the difference is 200-300% higher. We certainly do not see other retail goods marked up 2-3x compared to US prices.
Furthermore in southern Ontario, the distance to suppliers is far shorter and population density is much higher, than in many locations in the USA, yet our price differential is still much higher. (I travel to the US extensively)
Also these same differentials were in place when the US dollar was worth $1.60 Cdn. If all else remained the same, there should have been a HUGE decrease in the differential on currency rates (and the corresponding drop in taxes) on cheaper input costs alone! It would be nice to see some of that decrease passed on to the consumers.
I certainly would consider buying premium in Canada if prices seemed more fair.
In the meantime I will continue buying premium only when visiting the US until the differential becomes more reasonable in Canada.
Ron
Posted by: Ron345 | August 28, 2011 at 11:31 AM
yes i would like to know why the pump prices at the petro station in emeryville ont are always higher than other outlets reg gas 3 to 5 centa a litre and the diesel 10 centa a litre i can't wait for this excuse ????????
Posted by: perry grondin | September 08, 2011 at 03:31 PM
Hi Perry, thanks for your question. We do try to be as competitive as possible. We don't, on the other hand, have influence over the price that others in the marketplace may charge - whether it is an independent retailer or large corporate competitor.
- Pump Talk
Posted by: Pump Talk | September 16, 2011 at 02:17 PM
In the past week or two the price for a barrel of oil dropped from 5 to 7 dollars a barrel yet our price per litre did not drop and if it does it is not proportional to the market prices and is not changed in atimely manner. When the price of a barrel rises we see the price per litre of gasoline rise the very next day. I realize that the Canadian dollar has lost some value and this effects the price per litre BUT when our dollar was higher than the US dollar it did not effect our price per litre for gasoline. Can you explain why the price per litre does not follow in a logical manner the changes to the price per barrel of oil. The discrepancy make me think that the Ontario customer is being taken advantage of. Please comment and explain the reason for such a difference.
Posted by: Alan | October 06, 2011 at 06:40 PM
Hi Alan, great question. The relationship between crude oil and gasoline prices is not always correlated. There are many factors that affect the price of gasoline along with crude oil, including local competition and taxes. Our article in May 2011 helps explains this: http://www.pumptalk.ca/2011/05/gas-prices-go-up-and-down-but-what-causes-this-and-how-are-prices-set-in-the-first-place.html. There is also an article on Gas Prices & Crude Oil that we have published, it is a little dated - but still holds true: http://www.pumptalk.ca/2008/07/post.html. Hope this helps.
Posted by: Petro-Canada | October 07, 2011 at 05:10 PM