Static gas prices in city 'curious'
Northern News Services
Published Wednesday, December 3, 2014
SOMBA K'E/YELLOWKNIFE
A September 2013 report commissioned by the Department of Municipal and Community Affairs supports claims that Yellowknife's gas market is an anomaly compared to the rest of Canada.
"Overall, it is curious that Yellowknife gasoline prices have remained static over an 18 month period while prices varied by about 15 cents per litre in other parts of Canada," states the report, written by consulting firm R. Marshall & Associates.
The report was written as a preliminary investigation into price regulation in response to a motion passed in the legislative assembly in February 2013.
As part of its research, the firm compared gas prices between Whitehorse and Yellowknife, stating the two cities experience the same underlying costs for crude oil and refinery margins.
During this time, gas in Whitehorse fluctuated between $1.26 to $1.48 per litre while Yellowknife stayed the same at $1.389.
"It is hard to discern whether consumers are better off in a market like Whitehorse compared to Yellowknife," states the report.
"It is interesting to note that gas prices in Whitehorse appear to be lower during winter and more expensive during summer. There may be cost differences that account for this or alternatively, retailers in Whitehorse may be adjusting prices upward during tourist season (the June 2013 price of gas in Whitehorse was $1.48)."
The amount of fuel individual retailers sell per year is not public information, but the report did make observations based on reported national marketing margin statistics.
A marketing margin is the price mark-up per litre of fuel that is applied by the fuel retailer to arrive at the retail price. Retailers will include transportation costs and their own operating costs to the mark up.
The report found marketing margins in Yellowknife range from 24 cents per litre to 48 cents per litre over the 18 month period. This ranges from three-to-six times the national average of eight cents per litre.
In its conclusion, the report found little merit in price regulation in Yellowknife and identified a phenomenon called tacit price collusion as one of the likely reasons for unchanged prices.
Tacit price collusion is a situation where one retailer raises prices or holds them steady when costs fall and other retailers take signal and follow suit. The report says tacit price collusion is legal in Canada under the Competition Act.
Meanwhile in Yellowknife, Esso advertised gas at $1.299 Tuesday afternoon while the gas prices at other retailers held steady at $1.339. Average gas prices across Canada settled at 1.14 per litre for the week ending Nov. 25 according to Fuel Focus, Natural Resources Canada's bi-weekly fuel report.
