CAA-Quebec's review of gas prices: not all equal in the eyes of the industry

QUEBEC CITY, Feb. 4, 2015 /CNW Telbec/ - Renewed competition in Quebec City, deceptive price stability in Sherbrooke, and sharp, unjustified increases in Montreal are among the highlights of CAA-Quebec's annual review of gasoline prices. Price disparities saw motorists in some regions penalized, while others enjoyed a respite from unfairly high rates. And while the end of 2014 brought sharp drops in the petroleum price indicators (crude oil and refined gasoline), leading to pump prices unheard of in the past four years, the organization is warning consumers to remain vigilant in analyzing those prices.

Competition finally takes hold in Quebec City
The opening of a second gas station by a new player in the Quebec City region put an end to pump-price stability once and for all. Concretely, motorists from the Quebec City and Chaudière-Appalaches regions saved money last year because of the significant drop in the margin pocketed by retailers on each litre of gasoline sold (-22.5% in 2014 compared with 2013). "In the previous years, we had seen a lot of stability in retailers' pricing," says Sophie Gagnon, CAA-Quebec's Vice President, Communications and Public Affairs. "Such stability is generally to consumers' disadvantage, so it's encouraging that 2014 marked the return of long-awaited competition on the Quebec City market. The average retail margin of 5.5 cents a litre for 2014 in the region was even below the provincial average of 6.4 cents a litre, which is something we've never seen in the eight years since we first started our annual gasoline price reviews," she adds.

A problem situation in Sherbrooke
Meanwhile, motorists in and around Sherbrooke had to deal once again with too many periods of price stability, and as a result they paid too much for their gas in 2014. There were four periods of steady prices, each lasting between 33 and 39 working days. In CAA-Quebec's opinion, that deceptive stability, along with the fact that pump prices were higher than the realistic price on 71% of working days during the year, clearly explains why the retail margin was higher in that region. It rose from 7 cents/litre in 2013 to 7.6 cents/litre in 2014. This blatant absence of competition, the organization says, hit consumers' wallets hard.

Unjustified increases ahead of long weekends in Montreal: no longer just an urban legend…
In Greater Montreal, too many substantial and unjustified increases (up to 8 cents/litre) just before long weekends were observed. Of 18 price hikes that took place on a Friday, at least 6 were deemed unjustified by CAA-Quebec. An increase just before a holiday weekend, of course, is more damaging to consumers because it allows retailers to earn higher margins for longer. Further evidence that those increases were unjustified: each time, retailers lowered their prices a few days later, returning to more reasonable margins. These kinds of tactics certainly raise the ire of motorists — and with good reason. Unfortunately, they know only too well that the industry is generally quicker to make them pay for increases in the petroleum price indicators than to pass on the expected savings when the market goes in the other direction.

Moreover, the average retail margin increased by 9.2% over 2013. This industry behaviour, unfortunately, substantiates the popular opinion that retailers tend to take advantage of holidays and weekends to cash in. "This trend is something we simply haven't seen in previous years," Ms. Gagnon notes. "We understand that there are expenses involved in running a gas station, but those costs, which vary from one retailer to another, cannot justify this situation observed on Fridays and before holidays. The state of the market in the Quebec City region in 2014 proves that the industry can function perfectly well with more reasonable margins in a context of healthy competition," she concludes.

Good news for motorists as the year drew to a close
Although the average pump price of a litre of gas remained fairly stable in 2014 (133.0 cents/litre in Quebec City, 136.0 cents/litre in Sherbrooke and 138.1 cents/litre in Montreal), the price drops seen in the last three months of the year could spell big savings for consumers. According to CAA-Quebec's calculations, if current trends continue, a Honda Civic owner who drives 20,000 km/year could save $567.20 this year. For a Ford Escape driver, the annual savings increase to $754.40.

What's in store for 2015?
With Phase 2 of Quebec's emissions cap-and-trade scheme in effect since January 1, 2015, the rack price for gasoline in Montreal is now higher than in Toronto—a reversal of the trend observed in the past few years. That higher rack price, of course, means an increase in the purchase price for retailers. It's important to point out, however, that they have yet to pass that increase on to consumers.

The downward trend in petroleum price indicators and pump prices has continued during the first weeks of 2015. It is difficult to predict how long this respite for motorists might last.

Save with Gasoline Watch
By visiting the Gasoline Watch page at caaquebec.com, motorists all across Quebec can see whether the time is right to fill up, by comparing the realistic price calculated by CAA-Quebec with the average pump price for their region. And when they need to locate the nearest gas station, the CAA mobile app is the perfect solution!

Comprehensive information on retail margins, the year's highest recorded pump prices, and other market trends is available in a statistical summary on caaquebec.com, as well as via the organization's Facebook page and Twitter feed.

About CAA-Quebec
CAA-Quebec, a not-for-profit organization founded in 1904, provides automotive, travel, residential and financial services and privileges to its 1,290,000 members.

 

SOURCE CAA-Québec

For further information: Montreal, Anne-Sophie Hamel, Communications Advisor and Spokesperson, 514 861-7111, ext. 5478, Cell.: 514 717-4040, anne-sophie.hamel@caaquebec.com ; Quebec City, Catherine Major, Communications Advisor, 418 624-2424, ext. 5810, Cell.: 418 563-4590, catherine.major@caaquebec.com

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http://www.caa-quebec.com

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