This text is taken from the Courrier de l’économie of December 19, 2022. To subscribe, click here.
The price of gasoline in Quebec seems systematically higher than elsewhere. In Saguenay, gas is always 8, 9 or 10 cents cheaper. I cannot explain this difference. Is there collusion? asks one reader, Christine Croft. Fernando Lavoie, meanwhile, would like to know why less refined diesel is more expensive than gasoline.
First gasoline. On December 12, the average price at the pump was $1.44 in Montreal and $1.55 in Quebec. A notable difference, especially since the Montreal price includes a 3¢ increase in the provincial fuel tax for public transit and the differential in the cost of transportation between the refinery and the gas station is marginal, 0.3¢ higher for Quebec. The big difference then? In this December 12 price, the retailers’ margin before taxes was 5.6¢ in Montreal and 18.3¢ in Quebec.
The 52-week average of the acquisition cost indicator (i.e. before the retailer’s margin) is $1.70 per liter of regular gasoline in Montreal (including the 3¢ for public transport), 1 $.62 in Saguenay (including a tax rebate for remote areas) and $1.66 in Quebec. The difference therefore comes from elsewhere.
The explanation comes essentially from the margin of the retailers. According to data from the Régie de l’énergie, the 52-week average of this margin before taxes is around 8.6¢ per liter of regular gasoline in Montreal. It is 8.3¢ in Saguenay, 10.6¢ in Sherbrooke, 11.7¢ in Trois-Rivières, 13.1¢ in Quebec and 14.9¢ in Rimouski. The rather large gap can only be explained by “competitive mimicry” in the greater Quebec City region, one might say to be nice.
CAA-Quebec has repeatedly denounced this situation where motorists in Quebec City, but also in the regions, pay too much for their gasoline compared to the prices paid in Montreal, and has challenged the industry, without however receiving a response. According to the Competition Bureau, displaying the same price as its competitor does not constitute collusion.
As for the differential with Saguenay–Lac-Saint-Jean, the cost of acquisition is lower there than in the Capitale-Nationale region “due to the reduction in the provincial fuel tax […] the fact that it is a remote region and that transportation costs are therefore higher,” explains David Marcille, communications advisor and spokesperson, Public Affairs at CAA-Quebec. He adds that the price displayed in Saguenay–Lac-Saint-Jean is currently cheaper than in Quebec City, also due to fiercer competition, with service stations seeking to gain market share.
Which does not seem to be the case in Quebec. “In a market the size of the Capitale-Nationale, service stations should post different prices because they don’t all have the same sales volume. In addition, there should be stiffer competition between the different channels in order to gain market share,” notes David Marcille.
The war in Ukraine and its consequences
Then diesel. We note that in January 2022, the price of regular gasoline in Montreal was around $1.56 per litre, compared to $1.52 for diesel. In March, gasoline was selling for $1.84 per liter and diesel for $1.99. Between the two dates? The outbreak of war that Russia is waging against Ukraine without any provocation. The price of diesel has since evolved in line with that of natural gas, which has exploded.
Under sanctions and the boycott of Russian petroleum products, diesel has become the substitute for natural gas in terms of supply for many consumers and countries, mainly in Europe, but this has caused global demand to explode.
Added to this strong demand for substitution is the closure of refineries over the years. On this side of the Atlantic, analysts estimate that the American east coast alone has lost at least a quarter of its production capacity, without obviously being able to count on European compensation.
In short, at the loading ramp, the price of diesel fuel is currently 84.7% more expensive than regular gasoline.
Prices also vary according to seasonal demand, being higher for gasoline in the summer, higher for diesel in the winter (heating oil and diesel are two distillate fuels that change at the same rate). “In the fall and winter in North America, they are generally more expensive due to high demand for home heating. With the rise in prices caused by the conflict in Ukraine, the seasonal increase in the price of diesel “started from a higher price than usual”, summarizes the spokesperson for CAA-Quebec.
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