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$1 a litre gas for Christmas?

Published December 14, 2012

A buck a litre to fill ‘er up in Toronto this Christmas?

The barrel price of oil was about $86 this past week, compared to about $100 the same time last year. But, no surprise, local pump prices don’t reflect the lower cost of crude.

The average price of gasoline across the GTA this week was 117.6 cents per litre, about the same as it was this time last year and sadly gas price watchers predict prices will rise yet again in 2013.

“What I’m expecting to see is relatively low gas prices for most of the country for the next 10 days, and we may even see an increase as we get closer to the Christmas holidays,” said Jason Toews, co-founder of Gasbuddy.com.

“But we’re going to see them creep up again in the new year,” he added.

The lowest price recorded in Ontario last week was at Toby’s Gas Bar in Hagersville, about 45 km south of Hamilton, where they were selling the stuff on Monday for an even dollar a litre.

It rose to 106.9 cents by midweek, but you could get it for 104.9 cents just 15 km up Highway 6 at a Caledonia Shell station.

In other parts of the country, gas wars led by Costco have forced prices close to or below $1, such as in Edmonton this week where gas was selling for 95.9 cents per litre at five Costco outlets, undercutting area gas stations selling at 99.9.

Three weeks ago, when the price in Toronto averaged $1.21, it was $1.11 in Regina. Costco again led the way at $1.05, far below the $1.28 Regina drivers were paying a month earlier. In response, two independent stations there were charging 103.9 cents this week, a penny less than Costco.

Gas price wars were also waged with the bulk shopping retailer leading the charge in the Victoria B.C. area this past June and in December 2011.

Costco has eight locations in the GTA and some of its gas bars were selling regular at 112.9 cents this week, lower than any of its competitors.

“I’m going to put their cost at about $1.10 a litre,” Toews speculated.

“There are stations in Ontario getting close to a dollar. It’s not common and once they get that low they’re really not making any money,” he added.

Costco can afford to sell at a loss because by offering the cheapest gas they widen their $55 per-year membership base and draw free advertising from the news media whenever they fuel pump price skirmishes.

Because it only accepts American Express, debit cards and cash, the giant warehouse-styled chain store avoids paying fees to other major credit card companies, giving Costco the edge when it drives down the price.

“99.9 is a bit of a magical number and if they can justify it because their competition comes close they will go there,” said Toews, adding: “But I think it’s a bit of a stretch in Toronto because they would have to lose more than ten cents a litre, which just seems like too much of a loss.”

He said when Costco established itself in the gasoline business in B.C. a few years ago it drove prices down so low all its competitors were selling at a significant loss.

When asked last month if a Costco driven price war is in the cards for the GTA, Costco Canada spokesman Ron Damiani replied: “We have no comment to provide on what our strategy is for the price of gasoline or anything else.”

“Each market is different, so there’s no way we can predict what will happen in Toronto, Vancouver, Montreal or anywhere. Our mantra is ‘sell quality goods at the best possible price.’”

So it seems the only way we’re likely to get the gift of the joyful 99.9 cents a litre this Christmas is if we’re blessed with a gas price war and big oil has a Santa Claus complex and lowers its price in relation to the current dip in the cost of crude.

How likely is that?

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