Kent Group Ltd was commissioned by the Ontario Energy Board (OEB) to develop a report on retail transportation fuels prices. Here’s an overview of the findings:
The price of transportation fuel has a significant impact on the lives of Ontario consumers, the majority of whom use gasoline or diesel-powered vehicles as a primary source of transportation.
When considering factors such as crude prices, wholesale fuel prices, retail site volume efficiencies, and competition within a given market, we concluded that in each of the markets we reviewed, that fuel price levels, their volatility, and the inter-market differences that exist, are reasonable and representative of competitive market behavior.
Pump prices often vary by location: at any given time, they may differ between markets, regions, or provinces. These inter-market price differences are the result of three key differences: in tax rates, in differing wholesale prices arising from varied distance-related transportation costs, and in retail margins.
Over the last twenty years the responsibility for the retail sale of gasoline has largely shifted away from the owners of well-known brands (Esso, Shell and Petro-Canada) towards fuel marketers that are independent of refining and crude oil operations.
While some consumers view pump price volatility as indicative of a lack of competitive behavior, our analysis showed that markets with greater frequency of price changes generally had lower retail margins – and generally lower prices for consumers as a result. The correlation between price and volatility was the strongest of all the pricing factors that we examined.