Jump at the pump
Gas prices reach all-time high
Yellowknife (Feb 28/00) - The recent hike in gas prices has more effect on Northerners than perhaps anyone in the country.
Largely dependent on goods trucked and barged across the territory, Northerners will begin to see increases in everything shipped in from the south as shipping costs rise along with the fuel price.
Already feeling the price pinch are trucking companies.
Joe Gagnier owns ILE holdings in Hay River. He has six trucks, but has had to cut back to running three because of his recent rate increases.
"What's hurt me is I've tried to beat the high cost of fuel, so I've raised my rates on some of the work I do," Gagnier said.
ILE hauls miscellaneous freight and holds the contract to truck pop and chips for Petersen Auger from Edmonton to Yellowknife. He said increases will be passed on to the end-user.
"Definitely," Gagnier said, "we have to have rate increases -- this thing is going to snowball.
"When they raise the price of fuel, we have to raise our rates," he added.
Gagnier says he has a few long-term contracts where his bid did not allow for fluctuations in the fuel cost.
"We'll try to renegotiate, but failing that we'll just have to eat it and hope the price drops," he said.
"I have six trucks, but I'm just running three now," Gagnier said.
He said the larger competitors have a fuel surcharge added to their contracts and says his future long-term contracts will also compensate for fuel increases.
"I think in the future we will say, 'OK, this is our base price per load, but there will be a fuel surcharge along with that,'" he said.
Retail gas station owners have been forced to raise their price as new shipments of the more expensive fuels arrive.
Roger Rawlyk at Kelly's Convenience Store and Gas Bar in Fort Smith keeps his price just a few cents under his competition.
"I just raised it this morning," Rawlyk said last Wednesday. "It went up from 75.9 to 77.9.
"I'm always two cents a litre below everyone else, because I'm a self-serve," Rawlyk said. "Unless you are making 12 cents a litre above your cost, you won't be making any money."
Rawlyk says we haven't seen the last of the fuel increases.
"I predict we'll be in the low 80's within six months," he said.
Further North, the price has already passed 80 cents per litre. Cheryl Patenaude at Big River Service in Fort Providence says they too have had to follow suit with the increases.
"We've just raised it up to 80.9 cents a litre," Patenaude said. "It's not something we want to do, but it's going on all across the country -- it's just terrible."
Tom Forbes, the manager of Katami Co-op in Colville Lake, said the last increase they had was Jan. 1, but he expects to pay even more on the next shipment.
"Right now we are at $1.01.9 per litre," Forbes said. "I imagine we will see an increase on our next delivery."
Colville's gas is barged to Norman Wells and skidded to North on a Cat train. Forbes said the gas in Colville is all pumped by hand from 45 gallon drums.
Setting the price
Many factors determine the cost of fuel
by Terry Halifax
and Daniel MacIsaac
Northern News Services
Although oil is pumped out of the ground right here in the North, we pay some of the highest fuel prices in Canada.
The price at the pump is based on the world price which is dependent on three factors, said Bill Simpkins, vice-president of the Canadian Petroleum Products Institute.
"It going up because of the cost of crude oil is going up," Simpkins said. "There are three markets that actually affect the retail price; one is OPEC (Organization of Petroleum Exporting Countries) that determines the amount in supply of crude oil, because supply and demand will determine world price.
"OPEC produces about 30 per cent of the world's crude oil," he said. "They control supply, therefore they have some influence on the price."
The second influence on fuel price comes from wholesale market prices, Simpkins said.
"They are determined in an international marketplace as well," Simpkins said. "Canada's prices have to be similar to that of the U.S. prices, that have to be similar to external prices, just because if our price is higher, then import products will come in."
The third and most influential factor in setting the price is base on simple supply and demand, Simpkins said.
"The factor that affects most people is the retail marketplace," he said. "If demand exceeds supply, the price goes up. In Yellowknife you probably don't get much competition, because there are not a lot of dealers there.
"In the Toronto market, there are lots of dealers and when people don't buy, the price drops," he said.
Fuel pricing in the North also have a unique form of pricing controls according to Imperial Oil's public affairs officer Pius Rolheiser.
Imperial Oil has moved to its current system of "market responsive pricing" in the North in 1995, when the Proven Area Agreement it held with the federal government, which regulated prices, wrapped up.
Rolheiser said the company has since indexed its fuel prices with those in Edmonton, so that when the Edmonton price rises so does the Northern price.
"If you look at what Imperial Oil owns if a barge comes up in the summer, all the products are part of an inventory, so if we're holding this lower-priced inventory when the rest of the country goes up then that inventory becomes more expensive for us to hold," he said. "We certainly appreciate that it's frustrating for consumers when they see the prices rise."
Rolheiser also said cheaper, lower-grade gasoline available in the south isn't sold in the North because of extreme operating conditions. He added that while it may appear that fuel prices never drop once they've risen, they do -- though just not in the last two years.
"The point is that when we have market-responsive pricing, prices will go down," he said. "It's just that these past two winters the price of crude oil is as high as it was during the Persian Gulf War, and so all inventories are affected."