With gas prices continuously fluctuating across the province, sometimes leading to daily price adjustments at the pumps, some customers on the Sunshine Coast are left wondering why rates here tend to remain relatively flat.
On some days the prices in Vancouver might be upwards of 15 cents higher than what people on the Coast pay for gasoline, only to have the Lower Mainland price sink below Coast levels within a day or two.
"The supply and demand of fuel prices is a small part of how price is determined," said Stephen Doolan, a spokesman with Shell Gas.
While local service station owners avoided commenting on the subject, a look into the factors affecting gas prices both locally and provincially can be informative.
"The larger piece is the wholesale rack price, crude oil price and market price where aspects such as supply and demand, local tax conditions and competition come in," Doolan said.
Generally speaking, the pump price of gasoline is mostly composed of costs applied before the pump. First is the price of crude oil, which accounts for as much as 50 per cent of the cost. Federal, provincial and sales taxes also elevate the price by around 33 per cent. In the case of Vancouver, a 15 cent municipal levy can make taxes as high as 50 cents per litre.
Also affecting the price is the cost of refining crude oil into gasoline, which generally makes up another 15 per cent of the bill.
"The third piece is the actual retail markets," said Canadian Petroleum Products Institute (CPPI) director John Skowronski.
CPPI represents a wide range of Canadian companies involved at every step of the petroleum business, including refinery, distribution and marketing.
"For the most part, a majority of them are independent business people who compete for your business on a daily basis and try to provide products as well as other services that we want," Skowronski said of the typical corner gas station.
Retail outlets such as those on the Coast tend to have lower buying power than stations run by top-down corporate structures that enable gasoline to be purchased in much larger quantities.
The typical gas station from Gibsons to Sechelt depends on attracting customers to other services, such as convenience stores, car wash facilities and other retail ventures to turn a profit.
In order to stay competitive, gas is sometimes sold at a loss in order to maintain a vital share of the market and make sales of more profitable products.
"I can say when there's stability, generally it seems to suggest that the marketplace is in a balance," Skowronski said. "The business people who are competing for the business are satisfied with their share of the market."
He also said that the lack of land access to other stations like those in the Lower Mainland could play a key role in guiding the market forces on the Coast.
While the actual retail price might not change day to day, the cost of purchasing gas at wholesale rates is subject to the typical fluctuations, creating a boom and bust market for retailers who depend on the sale of other services.
"The alternatives for the consumer are somewhat limited," Skowronski said, pointing to the local market forces that govern the price. "It's tougher for the consumer to go to a different place to buy their goods."
