By Sheldon Spackman

Pump Prices

Red Deer missing out on gas price wars in Calgary, Edmonton

Jun 12, 2019 | 1:45 PM

You may have noticed by now that gas prices in Red Deer are around 15 cents per litre higher than in Alberta’s two biggest cities.

Price wars are being identified as the reason Edmonton and Calgary motorists are currently enjoying lower fuel costs than their counterparts here and in other parts of Alberta.

According to gasbuddy.com, motorists in Edmonton are paying an average of 97.1 cents per litre for regular gasoline, while drivers in Calgary are paying an average of 98.9 cents per litre.

Red Deer drivers are paying an average of 111.9 cents per litre – placing 21st for the least expensive fuel in Canada.

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Dan McTeague, senior petroleum analyst with gasbuddy.com says the wholesale price that each market pays is pretty much the same.

“In Calgary you have what looks like an ongoing, almost permanent gas war in which retailers are willing to sell gasoline without normal operating costs associated with it,” he explains. “In other words, you need six to eight cents a litre minimum to be able to pay for the running of your gas station. If your principle business happens to be selling gasoline, selling it at wholesale or in some instances below wholesale cost, means you either have to have a very generous bank, rich uncle or someone who is prepared to spot you in order to meet what your competition is.”

McTeague says there is usually a margin of eight to 10 cents a litre, versus zero in places like Calgary.

“That creates a sort of illusion that you’re somehow being taken advantage of,” he explains. “The reality is that Calgary is nuts and there’s no gas station there that can survive just selling gasoline alone. Or you use gasoline as a loss-leader, in which case you recoup it when people buy a coffee or buy a pack of beef jerky.”

According to gasbuddy.com, Albertans are paying the lowest prices in Canada for gasoline, with a current average of 104.8 cents per litre, while those in the North West Territories are currently paying the highest, with an average of 147.6 cents per litre.

McTeague describes the situation in Alberta as a price war where gas stations involved are willing to forego what it costs to run their stations.

“When I’m seeing gas prices that are in the range of what we’re seeing in Calgary, they’re selling below cost,” says McTeague. “They have to be making it up another way or being given some kind of advantage. When you have that kind of situation in smaller communities, you would expect a lot of players to exit the market, then watch out, when that happens, you tend to see much higher prices.”

However, McTeague does not expect higher gas prices for Alberta this summer, but instead ‘gently falling’ prices.

“The markets right now are very fearful of demand dropping and supply bulging,” says McTeague. “But at the same time, overall concern about the health of the global economy with the leading economies – the United States and China seemingly involved in a deepening trade war, that’s likely to push some economies into recession in the not-too-distant future.”

While lower gas prices are good news for motorists, McTeague admits it’s not great news for the energy sector.

“But that’s what happens when the war is engaged in tariff disputes and no one seems to be blinking.”

(NOTE: Gas prices listed in this story are as of 12 p.m. on Wednesday, June 12)