Players in the Local Market

    Local retailers are content to follow the lead of market price leaders, Shell and Petro-Canada. Both these companies set their Lethbridge market prices from their head offices in Calgary. Shell owns Turbo station outright and occupies a dominant position in the local market. Local operators of these outlets sign strict contracts requiring them to change prices when directed and agree to provide the petroleum company with a share of their retail store profits from the sale of confectionaries.

    Esso operates a strict wholesale/retail relationship with its retailers and offers them little support. When prices fall they are left with expensive inventory and incur losses. When prices rise they reap windfall profits. We saw Esso station operators decline to participate in the price war last September because they could not afford to sell gasoline below their delivered cost.

    These companies operate refineries in Alberta and supply all other gas stations.

    The introduction of Safeway to the market two years ago temporarily brought new levels of competition . Their entry into the market was followed by the closure of three Esso stations (5th Ave N & 13th St, 3rd Ave S & Mayor Magrath and 8th Street & 3rd Ave S.)

    Most stations offer a 3.5 cent discount from the posted prices. At Safeway and Petro-Canada the customer must be a member of their club to qualify for the discount program. Safeway offers unadvertised double discounts amounting to 7 cents per litre. One independent station, Triangle Gas on 2nd Ave North, consistently offers discounts of 5 cents per litre.

    The 2nd Ave North area is the most competitive. Canadian Tire offers bonus Canadian Tire currency to their gasoline customers, redeemable for merchandise in their store. Save-On Foods offers a basic 3.5 cent per litre discount plus increasing discounts based on the value of groceries purchased.

    Profits for the quarters ended December 2002, March 2003 and June 2003 were at record levels as the major petroleum marketing companies achieved revenues far higher than their costs of production in the build up to the invasion of Iraq. a phenomena that occurred in all other markets. Companies operating refineries ( Shell, Petro-Canada and Esso) were able to achieve significantly higher margins.

    What is particularly notable is that gasoline price declines following the conclusion of the war in Iraq were far more dramatic in other communities than they were in Lethbridge as some of the attached data indicates.

    There has been at least one presentation to city council in the past on this issue when a petition of more than 5,000 names was submitted protesting local pricing levels January 2000.

 

 ....... Possible Solutions