Gas price difference explained

  • Mon Dec 22nd, 2008 10:00am
  • News

Gas prices on the islands are way down, as they are elsewhere, but there’s a big difference in prices at the north end and in the south end.We decided to find out why.According to Kirk Thorgeirson at TLC Automotive in Masset, the reason his gas is $1.00 when Skidegate and Queen Charlotte are about $.93 is because Imperial Oil/Esso is a large corporation, which sells gas more cheaply to its branded stations and North Arm Transportation (his supplier) is an independent company that has to buy fuel “off the rack” or, in other words, from a wholesaler. “It’s like the local Co-op competing with Wal-Mart. It’s not a level playing field,” he said. Natanis Hageman, office manager at North Arm in Masset says as an independent agent, North Arm purchases from a refinery (in this case Chevron) at a rack price. She said right now the company has a 2 million-litre holding tank of fuel bought at a higher price than fuel costs today. But because the company has to be competitive for its customers (North Arm supplies Masset, Old Massett and Port Clements gas stations) it sells the fuel based on the price of today’s fuel. “We try to work out the best prices we can for our resellers,” she says. Stations like those in Queen Charlotte or Skidegate, not only have the advantage of getting fuel direct from Imperial Oil/Esso, which has its own refinery, but branded stations get a further discount. She says stations on reserves are eligible for further discounts by applying for tax exemptions. All in all, she says it’s tougher for north end fuel stations because there are more of them competing for the same customers and profit margins on fuel are low. So spreading the fuel sales around so many stations keeps the volumes sold at each shop low. Mr. Thorgeirson says the extra $.5 or $.10 a litre he has to pay is worth it if he can support a local company. He’s a real believer in supporting local retailers, he says. “The average dollar in a small community circulates six times before it leaves.” “If I don’t buy from the local Co-op, the cashier doesn’t have a job and then she doesn’t buy tires or get her car fixed in my shop,” he says. Mr. Thorgeirson says he could buy from Esso, but unlike the folks who work at North Arm, the Esso people aren’t likely to drive up to his shop to get their vehicle fixed. The good news in all this is that prices are likely to continue to fall.Not long ago, a litre of gas cost $1.60, it’s around a dollar now, and likely to go lower, although it takes three to six weeks for market fluctuations to be reflected at the pump.