Gas prices below $1 at some locations around Calgary likely won’t be around for long and are a “head fake” in a gas price war, according to a leading expert.
The lower prices were reported over the Nov. 29 and 30 weekend at various locations in Calgary, falling to 99.9 cents per litre at one southeast Calgary gas station, but gas price expert and President of Canadians for Affordable Energy Dan McTeague says it’s just a temporary low caused by a gas price war.
“It’s gas bar shenanigans,” McTeague said in a Dec. 2 interview with The Epoch Times.
“For those in Calgary who are enjoying gasoline that’s being sold anywhere from 10 to 15 cents below cost, expect that to be restored. Expect normal, realistic prices to be restored. It’s going to be a bit of a shock. Take advantage of it while you can.”
McTeague said the low prices are not true market indicators but are the result of some stations choosing to sell fuel below the amount they pay for it.
Those selling below this point often rely on dealer support where refineries temporarily cover the station’s losses with profits refineries make from strong crack spreads, in which they can earn 20 cents or more per litre between the amount it costs them to refine and the wholesale price.
The purpose, according to McTeague, is to “gain market share and maintain market share.” He added that once a station becomes highly popular due to lower prices, it can also obtain a volume discount and get promises of future volume discounts as it begins selling a higher volume of gas.
He pointed out that gas in Calgary currently sells to stations for around 80 cents per litre, plus 13 cents of provincial fuel tax, 10 cents of federal excise tax, and 5 percent for GST, meaning stations are paying at least $1.08 to $1.09 to get the fuel.
This doesn’t even account for the various additional costs of operating a gas station, such as staffing, utilities, loan servicing, and credit card fees, which generally require a margin of at least 8 to 10 cents per litre. McTeague said that a real sustainable retail price for gas in the Calgary area is thus closer to $1.17 to $1.20 per litre.
He added that a rise in the Chicago spot market, which serves as a benchmark for gas prices in Western Canada, would immediately restore retail prices back to previous levels as stations would add back their profit margins. Although Canada is currently seeing the lowest average prices since the early post-COVID period due to cheaper U.S. oil prices, the elimination of the consumer carbon tax, and gas station competition, McTeague said prices should rise slightly ahead of the holidays.
“You should be back to about $1.20, and that’s where you'll be towards Christmas,” McTeague said.
In terms of a longer-term future outlook, McTeague said there are too many factors at play to make a reliable prediction.
“You can’t predict what’s in the mind of a gas station that expects to lose 10 to 15 cents a litre, or has some kind of an arrangement with their supplier. You really determine, you know, the course of geopolitics or supply and demand,” he said.
