In Nelson, the Mobil gas station on Lakeside Drive in Nelson was selling gas for 185.9 per litre on Dec. 9. In Trail the same company was selling for 172.7.
Why the difference?
Raj Manhas, the owner-operator at Mobil, said his customers often ask him this.
“People are thinking that we are the one who control the price, but that’s wrong,” he said. “It’s the head office. They are the ones who control the pricing.”
The Nelson Star, curious about the criteria for these decisions, was not able to contact any of the decision-makers at Mobil.
The average gas price in Nelson, across all four stations on the morning of Dec. 9 was 185.9 cents per litre. In Trail it was 172.7. In each city, the prices are clustered within three cents of each other.
Nelson has some of the highest gas prices in the province. According to a tracker on the website bcgasprices.com on Dec. 9, Petro-Canada on Anderson Street is the eighth highest station in the province, after individual stations in Ukluelet (two stations), Buckinghorse River, Chetwynd (two stations), Wonowon in northeastern B.C., and Kitwanga in northwestern B.C.
The other gas stations in Nelson rank 10th, 12th, and 15th in the province.
Two days earlier on Dec. 7, the Petro Canada station in Nelson was fifth highest in the province.
Manhas said Mobil has told him they don’t consider gas stations outside the community to be their competition, and that prices in Nelson don’t depend on prices in Castlegar or Trail or even nearby Taghum. The competition is strictly within the city.
Chris Sapriken, general manager at the Slocan Valley Co-op that recently purchased the Husky stations in Trail and Nelson, agrees with Manhas. He says separate market prices in those communities are set by the big oil companies, and the co-op follows their lead.
“We observe what the market is doing and we move with the market,” he said.
Patrick De Haan, an energy analyst at GasBuddy.com, said this scenario — big differences between communities but not much apparent competition within the community — is very common. He said prices in a community will go down if one “aggressive” gas station decides to drop its price significantly.
Then why don’t they do that?
“Good question,” he said. “They’re happy with the status quo and don’t want to start a price war, potentially.”
De Haan also said stations in Nelson could drop their prices if they want to.
“They can absolutely afford to lower prices, they just don’t want to.”
Dan McTague, president of Affordable Energy Canada, in analyzing the West Kootenay gas stations’ profit margins assumes they are receiving their fuel from terminals in Kelowna, Kamloops, or Calgary.
Rack price is what stations pay terminals for fuel. To calculate the total cost, McTeague takes the listed rack price, adds a transport cost of 10 cents per litre (he says that is a generous estimate) and 35.5 per cent for taxes (federal, provincial and carbon).
On the morning of Dec. 9 the Petro-Canada rack price at the Kamloops terminal is 89.20 per litre. Adding transport and taxes results in a cost to the local gas station of 131.6 per litre that is being sold to the public for 185.9 in Nelson and 170.7 in Trail.
The Petro-Canada head office did not respond to a request for comment. The Nelson Star could not immediately reach local Petro-Canada management.
McTague said if they are getting their gas from Calgary, they would be making even larger margins because the Calgary rack price on Dec 9 is 74.80 cent per litre.
“I think what you’re seeing here is that retailers are holding on to fairly generous margins,” McTeague said. He referred to the margins in Nelson as “a license to print money.”
He added that this is not price fixing.
“It’s just that each one of them doesn’t have an incentive to drop the price.”