GENERAL INTEREST / Findings regarding Gasoline Retailing in Canada
TORONTO, Feb. 18 /CNW/ - A recent government-industry study points out a
number of important findings regarding gasoline retailing in Canada.
The Canadian Retail Petroleum Markets Study, a joint initiative of
Industry Canada, Natural Resources Canada and the Canadian Petroleum Products
Institute, took an in-depth look at the competitiveness of retail gasoline
markets across Canada.
Among the report's findings:
- A state of vigorous competition exists within the Canadian petroleum
marketing sector;
- Average pump prices at Canadian gas stations--excluding taxes--have
been in long-term decline. Although prices constantly fluctuate in
response to seasonal demand and other market factors, there has been a
clear down-ward trend. Between 1986 and 1995, the average ex-tax pump
price fell by four cents a litre measured in actual dollars and 10
cents a litre in constant (inflation-adjusted) dollars;
- Canadian pump prices in urban markets have been roughly equal to--or
even less than--U.S. pump prices for several years, if the higher
Canadian tax content is excluded;
- Gas prices have had a mitigating effect on Canada's inflation rate,
comparing favourably with the ''all items'' category of Statistic
Canada's Consumer Price Index during nine out of 10 years from 1986 to
1996.
- The typical gasoline retailer realized an average gross product margin
of 3.5 cents on the sale of a litre of regular gasoline during 1996.
That amounts to 6% of the average pump price. Taxes, meanwhile,
averaged 28.6 cents per litre--accounting for more than 50% of the pump
price.
- Both refiners and marketers of petroleum products in Canada have
experienced a decline in margins as a result of price
competition--despite an upwards trend in crude oil prices since 1991.
- The uniformity of posted pump prices within a given market area
reflects dealers' determination not to lose market share to nearby
competitors rather than any collusion to ''fix'' prices.
- A clear correlation between retail outlet volume and gross product
margin which are two of several factors influencing profitability.
The study included detailed analyses of 19 different retail gasoline
markets from British Columbia to Atlantic Canada. It found that varying levels
of provincial taxes and marked differences in retail outlet ''throughput''
were the major factors behind market-to-market discrepancies in pump prices.
As well, the study documented the increasing importance of ancillary
revenues--from car washes, convenience stores etc.--to a retail gasoline
industry that is being transformed by a combination of lower margins at the
pump and motorists' demands for convenient, one-stop shopping.
Taking all of the findings into account, the study concluded that:
''Where a healthy competitive climate exists--as it does in the Canadian
petroleum marketing sector--direct regulatory interventions may have an
adverse effect on competitiveness, possibly to the detriment of the consumer,
says report author Michael Ervin.
The Canadian Retail Petroleum Markets Study was carried out M.J. Ervin &
Associates, an independent, Calgary-based consulting firm. Although the
research was completed and the findings presented to the steering group in the
autumn of 1997, the report has never been widely circulated to either the
media or the general public.
Given the high level of interest in the often-controversial issue of
gasoline retailing and pricing, the CPPI has decided to make the findings
available in order to facilitate better public understanding of a complex
industry and promote informed debate regarding public policy. Also, this
information is particularly timely as the level of interest is peaking because
of possible political initiatives that will diminish competition and increase
cost to the Canadian consumer.
Copies of the complete report, including separate competitive analyses of
each of the 19 markets surveyed, are available upon request. |
