Gas pump collusion denied

www.canada.com Vito Pilieci CanWest News Service Thursday, February 27, 2003

The Canadian Petroleum Products Institute says the continuing rise and fall of gas prices at the pump is not the product of collusion in the industry, but the result of a healthy competitive market.

"People don't understand and it's almost impossible to explain," said Alain Perez, president of the institute, an association of Canadian companies involved in the refining, distribution and marketing of petroleum products. "How do you convince people that you are actually losing money?"

Many motorists are quick to suggest a conspiracy when pump prices jump by several cents -- almost simultaneously -- at gas stations.

But Perez said the reason the prices rise is because competing gas stations, who are at war with one another for customers, continuously chip away at their prices, driving them downward over the course of a few days.

The prices continue to fall until the selling price of the gas is lower than what the gas station paid for it.

"(Consumers) think, 'Why am I driving in the morning and it's at 72.9 cents and coming back in the afternoon and seeing 79.9 cents?' " he said. "At 72.9 cents, people are actually losing money."

When the price reaches the money-losing level, one of the gas stations will raise its prices, usually by several cents, to offset losses, and all of the competing gas stations in the area quickly follow suit.

Then the cycle starts all over again.

"I cannot stop that, nobody can stop that," said Perez. "If we were able to stop that, we would be colluding."

The institute's statements come at a time when gas prices are soaring due to the threat of war in Iraq, economic strife in Venezuela and a long and very cold winter in Eastern Canada.

The statements were made in reaction to plans by a House of Commons committee, which wants to question Canadian oil industry executives about high gasoline prices over the next few weeks.

Canadian oil companies argue that aside from geopolitical events occurring around the world, high Canadian gas taxes are one of the most significant reasons that prices are soaring at the pumps. Taxes account for about 31.2 cents of the price of a litre of gasoline.