Wide price gap for premium gas among stations

Observations show price of regular grade is not a good guide to what you'll pay for premium

Nov 14, 2009

Special to the Star

Price shoppers beware: if you buy premium gasoline, the price on the stations' roadside sign can be misleading.

That's because the markup on premium varies greatly between retailers.

For example, two stations may post an identical $1 per litre for regular, but one may be charging $1.15 for premium while the other is charging only $1.10.

If you're pumping 50 litres every couple of days, that could add up.

The wholesale differential between regular and premium gasoline is just 5 cents per litre. The remainder (of the retail markup of 10 to 15 cents per litre above regular) is a result of a severe lack of competition, says Dan McTeague, Liberal Member of Parliament for Pickering-Scarborough East, and opposition critic for consumer affairs and consular services.

"Canadians are no longer paying the world market price for our energy. A serious lack of competition has allowed major refiner-marketers to artificially inflate the price of fuel," McTeague says.

His website, www.mcteague.ca, cites that across Canada, the "rip-off" varies between 5.5 and 11.5-cents per litre based on the difference between the world market price for regular gasoline and the wholesale price being charged by refiners – and that's before it even arrives at your local gas station.

The major oil companies deny this charge, noting that past Competition Bureau investigations have cleared them of collusion.

But what do the numbers say?

Surveying a handful of retailers in southern York Region over several weeks, I found that mid-grade (89 octane) gasoline varied between 5 to 9 cents more per litre than regular. Premium gas ranged from 10 to 14 cents more per litre.

The lowest differentials were offered by an independent who asked not to be named because he feared repercussions from his supplier "for not maintaining the status quo."

While there wasn't a Pioneer location in the area surveyed, a Mississauga Pioneer station I visited was only slightly higher with mark-ups of 5.5 cents per litre for mid-grade and 11 cents for premium.

The highest differentials were from the major oil company retailers and, incidentally, were exactly identical at last check.

However, the numbers don't appear to be consistent throughout the province.

A Petro-Canada I visited in Kitchener, for example, charged 10 cents more for mid-grade and 15 cents more for premium.

Also, a week after I made inquires for this article, the previous top- markup retailer dropped its margin by one cent per litre for both mid-grade and premium, to fall in line with other big oil retailers.

According to Petro-Canada, in 2007, its Canadian average pump price comprised crude costs (48 per cent), taxes (32 per cent), refining and marketing costs (17 per cent) and profit (3 per cent).

So far this year, the Toronto retail price of regular gasoline has averaged 90.2 cents a litre, mid-grade has averaged 97.5 cents, and premium has averaged 102.4 cents. This results in grade spreads of 7.3 cents more for mid-grade and 12.2 cents more for premium than regular.

At the wholesale level, the grade spreads are 3.4 cents and 5.2 cents, respectively, above the price of regular gas, notes Spencer Knipping, oil adviser for the Ontario Ministry of Energy and Infrastructure.

If you weren't aware of it, mid-grade is blended at the pump from regular and premium gasoline. There are no government standards dictating a 50:50 blend, but refiners tend to tailor their gasolines as close to the 89-octane voluntary standard as possible, Knipping says.

So, at stations where mid-grade gasoline isn't priced halfway between regular and premium as it should be, consumers could, theoretically, achieve the same mix and save money by just buying a half-fill of regular and then another half-fill of premium.

Unfortunately, since only the price for regular gasoline is posted on the large roadside sign by retailers, consumers who want mid-grade or premium gas usually have no way of knowing what price they'll pay until they actually pull up to the pump.

Toronto Star