Your bottom line: What you should know about gas prices

July 26, 2018 - Tags: Regulations Managing

This guest blog post is provided by the Competition Bureau, an independent law enforcement agency that ensures Canadian businesses and consumers prosper in a competitive and innovative marketplace. Headed by the Commissioner of Competition, the Bureau is responsible for the administration and enforcement of the Competition Act, the Consumer Packaging and Labelling Act (except as it relates to food), the Textile Labelling Act and the Precious Metals Marking Act.

If you are in business, the price of gas affects your bottom line.

The impact can be direct, like your transportation and shipping costs. It can also be indirect, as a result of those same costs paid by your suppliers or your customers.

As a result, gas prices can be an even greater concern to businesses than to consumers. Understanding key factors that affect the price of gas can help you and your business make confident and informed decisions when purchasing gas.  

First, gas prices can change quickly. They depend on the wholesale price that gas stations must pay their suppliers, which can change on a daily basis. Prices also rise and fall depending on changing consumer demand and supply conditions. For example, they often rise when more people are travelling, or when oil refineries close for maintenance or due to a hurricane, and fall when demand is low and supply is strong.

The final price at the pumps can also vary from region to region for a variety of legitimate factors. For example, the presence of one or more aggressive price competitors in a local market may lead to lower prices. Retailers in large cities usually sell more gas, which means they can charge less per litre and still make a profit. On the other hand, the higher cost to transport gasoline to areas far from major cities will show up in the price at the pumps.

Given that gas prices are posted on large street-side signs, competing gas stations often charge similar or identical prices because they don't want to lose customers. Charging identical prices isn't illegal. However, it is illegal for competing gas stations to agree to set those prices.

Canada's Competition Bureau steps in to investigate when it finds evidence of price-fixing or other anti-competitive conduct in the retail gasoline sector. Since 2008, 33 individuals and 12 companies have pleaded or been found guilty of fixing the price of gas in several markets in Ontario and Quebec, with fines totalling more than $6 million.

All businesses depend on a fair and competitive marketplace — including the gasoline market — and you can help the Competition Bureau detect illegal activity.

If you think the company you work for has an illegal agreement with its competitors, report it through our Whistleblowing Initiative and we will keep your identity secret.

If you've been involved in an illegal agreement but come forward to collaborate with our investigation, you may be given immunity or favourable treatment under our Immunity Program or Leniency Program.

Visit the Competition Bureau's website for more information on gas prices and its investigations.

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