The Gas in High Gas Prices

Hurricane Katrina made a clear case for oil companies. Their accounting instincts and MBA mindset made them quickly realize that there was even more money to be had in that thar oil. Any catastrophe will be a good catastrophe. Large or small. Even the average refinery fire will do. As if they have never had fires in the entire history of oil processing. Ask anybody in Sarnia about that. And then there's maintenance. They have to slow production for that even if it's timed exactly when crude prices are dropping (more profit yet!). So without any kind of collusion (per the Canadian Association of Petroleum Producers) our several North American petroleum companies independently came to the resolve that gasoline prices would rise to roughly the same price (within a penny or two) no matter which company you buy it from. As if there is some sort of actuarial scale which dictates the price of oil by catastrophe type. So we keep on paying hard for the last catastrophe until the next one comes along and then we’ll be told to pay even more (compound catastrophe gains). Fuel prices are forcasted to rise to $1.30/litre this summer.

Petroleum front men tell us that the culprit is higher wholesale prices driven by extremely low gasoline inventories. It's funny how a refinery fire at Mobil impacts Petrocan’s retail pricing as if the fire was at a Petrocan facility. It’s also funny that all of the other petroleum producers don’t take advantage of such a situation to gain competitive edge (maybe they're all owned by the same parent company). And who ever heard of any manufacturer who didn’t plan for and have reserve/buffer capacity for just such events?

Enter the Competition Act. “The Competition Act (1985) is Canada's antitrust legislation. The purpose of this Act is to maintain and encourage fair competition in Canada. The Competition Bureau, an independent law enforcement agency, is responsible for administration and enforcement of the Act. Its role is to promote and maintain fair competition so that Canadians can benefit from competitive prices, product choice and quality services.

Under the Competition Act, it is illegal for gasoline retailers to:

Agree to fix prices or enter into other anti-competitive agreements;
Try to influence another retailer's prices by agreement, threat or promise;
Persuade wholesalers to cut off gasoline supplies to discount retailers because of the discounter's low prices.
Under the Act, gasoline wholesalers are prohibited from:
Agreeing to fix prices or enter into other anti-competitive agreements;
Trying to influence another retailer's prices by agreement, threat or promise;
Refusing to supply a gasoline retailer just because that retailer charges low prices.”

Lucky for us our federal government seems to be all over this one. Their judgments are obviously based on those “Catastrophe Actuarials” handed them by industry lobbyists. The bloated revenues they bring in from inflated gas prices make them work harder for us too [sic].

Maybe the solution (fix) to all of this lies within the petroleum industries own logic. How does a petroleum producer get around “extremely low gasoline inventories”? Let’s see…Produce more, add process capacity, add extra storage, purchase more? Nah!...Sounds too easy. Maybe we consumers could help out by not purchasing fuel for a while. We know that one doesn’t work. We’ve all passed along the boycott e-mails and we all know that we need our gas to function properly. (the oil companies know it too).

Here’s a way: Why don’t we consumers collectively decide to boycott our premier supplier (Petrocan). Buy gasoline anywhere you want but not from Petrocan! Put the hurt to these guys the same way they put the hurt to us. Force them to accept their own laws of supply and demand. Let them be the first to drop prices and watch what happens from there. Since short supply is an issue lets help out with that one too. Buy a little bit less gas every week (say a gallon or two) and cut down on your driving by 60 kilometers per week to match. This simple gesture would put an easy 30,000,000 gallons back into supply or keep $137,000,000 out of oil pockets. (However you prefer to look at it). You can count on one thing for sure. Be prepared to keep doing this for several months because Petrocan will fight back with all of the time and reserves they have. You can bet that they have a rainy day stash (ironic). Have some fun with this. Get on the bandwagon (stop purchasing from Petrocan and consume a little less fuel). Start spreading the game plan around the internet too. Cyberspace is more powerful than oil if we all harmonize. Happy motoring.

Some links:
http://finance.sympatico.msn.ca/investing/insight/article.aspx?cp-documentid=4907202
http://www.capp.ca/default.asp?V_DOC_ID=603
http://fuelfocus.nrcan.gc.ca/fact_sheets/laws_prices_e.cfm
http://en.autos.sympatico.msn.ca/finance/Fuel_bill_estimator.aspx
http://fuelfocus.nrcan.gc.ca/prov_map_e.cfm?ProvCode=ON
http://finance.sympatico.msn.ca/investing/news/businessnews/article.aspx?cp-documentid=4914321