Could a gas price war be coming to Toronto?

By Henry Stancu Wheels.ca

Nov 21, 2012 5 min. read

Article was updated 11 years ago

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So, will the price of gas drop to 99 cents a litre in the GTA by Christmas?

Likely not, unless Costco sets off a gas price war here like the one they’ve been waging out west since last December and only if the big oil gets a Santa complex.

A barrel of crude is currently at about $87 and, no surprise, while it was at $100 this time last year the price at the pumps was near a nickel cheaper then.

The price per litre in Toronto this week is averaging $1.21 while it’s around $1.11 in Regina, where a petrol price battle is raging with Costco leading the charge at $1.05, way below the $1.28 a litre it cost to fill ‘er up a mere month ago.

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In Victoria, B.C., the price dipped below a dollar last December when Costco launched a fuel duel forcing competitors to lower their prices. One independent vendor was selling at 97.9 cents.

During this past June a gas price skirmish broke out in the community of Langford, B.C., about 10 km west of Victoria, where it sold at 102.9 cents per litre with the big box consumer club retailer once again leading the fray.

It’s a win-win situation as Costco increases its $55 per-year membership base and draws free advertising in the media at the cost of a meagre or even zero gas profit.

Here in the Greater Toronto Area, where buck-a-litre by year’s end fuel price prediction was made by one and vehemently disputed by another gas price guru, the big question is: Are the glorious gas wars headed this way?

“We have no comment to provide on what our strategy is for the price of gasoline or anything else,” said Costco Canada spokesman Ron Damiani in Ottawa.

“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.’”

Costco won’t reveal what it pays for fuel but as a major North America retail giant it can afford to sell at a loss and even below a dollar for the short term to widen its customer base, said Jason Toews, of www.GasBuddy.com in Regina, Sask.

Toews and Dustin Coupal founded the online fuel price monitoring organization in 2000.

Last March gasoline in the GTA topped $1.31 a litre and at the time Toews suggested it could go as high as $1.40 or even hit $1.50 a litre by the summer.

Prices did reach $1.38 and in some cases hit above $1.40 a litre before season’s end.

“It’s like forecasting the weather. You have to use the information you have at hand,” Toews said, adding: “Just to be clear, I said Costco could go below 99 cents and not the average price in Regina.”

The current Costco gas cost conflict in Regina comes on the heels of consumers and advocates of lower gas prices criticizing the oil companies’ exorbitant mark ups in Western Canada, where Toews points out fuel taxes are also much lower than in Ontario, but the oil firms rake in a profit of as much as 26 cents per litre.

In Ontario the profit margin of gas vendors is about five to eight cents a litre, which leaves them with a minuscule take per fill up when the competition heats up and prices drop — that is unless the producers lower their rates.

And how likely is that?

“The higher profit margin in Western Canada is obscene,” says Dan McTeague, former Liberal MP and longtime gas-price monitor and industry watchdog who operates the website www.tomorrowsgaspricetoday.com in the GTA.

“We’re on the fault line here in Toronto because we get some of our oil and gas from out west and some imported.”

The pump price “is very much based on a whim. Someone makes a decision and others follow in a micro-second. Prices can jump to $1.28 and trickle down to $1.12 like that,” McTeague says.

McTeague posts his gas price predictions a day or two in advance, and he has publicly taken offence to Toews’ longer term fuel cost forecasts, especially when the Gasbuddy.com co-founder last month told The Star the price of gas could drop as low as 99 cents in the Toronto area by the end of this year.

So far, Toews’ buck-a-litre projection is nearing the mark in Regina, yet it still remains to be seen what happens in Toronto this year.

On his site, McTeague has referred to Toews’ below-a-dollar forecast as a “99 cent looney tune prediction.”

“It’s impossible to make predictions that far ahead. Predictions in the long term have no basis in fact and are frankly irresponsible and sensationalist,” he said, also referring to Toews as a “serial guesser.”

For the record, Toews has said he was thinking ahead to the price drop in Regina when he made the buck-a-litre GTA call a month ago.

When asked this week to predict what the price of gas will be in Hogtown before the New Year, Toews said: “In the Toronto area we are going to see the pump price between $1.17 and $1.27 a litre.”

Toews and McTeague aren’t really that far apart in their year-end price predictions

“The safest thing I can say is what you see is what you get and that it remains in the $1.20 to $1.30 range. Anything beyond that is just guessing,” McTeague says.

If Costco extends its gas war eastward and big oil stopped playing the Grinch it would bring a nice Christmas gift to motorists here.

At least until prices rise again as they always do and Toews’ 2013 gas price prediction sinks in.

“Mark my words. We’re going to see gas prices higher next summer than we did last summer.”
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