The Rip-Off

How do you react when someone lies to your face? What do you do when you have no recourse? No, I’m not talking about Donald Trump.

When Hurricane Harvey was heading for the Texas coast, more than a week ago now, there was speculation as to what effect, if any, the storm would have on gasoline prices. Texas is home to many oil refineries and they would have to shut down for the duration of the storm, which might cause a spike in prices at gas stations across the continent. Supply and demand. People were warned to expect an increase of 15 cents a lire.

As predicted, in Canada the price of gasoline soared at the pumps as the Labour Day weekend started. The oil companies assured everyone it was unavoidable. But instead of a 15 cent jump it was 35. That is $1.40 for a US gallon if you are still using that system.

I doubt the big oil companies care what anyone says about them, which makes them unlike Donald Trump. They have a monopoly and can do what they like as long as we have gas-powered vehicles and need oil and gas to heat our homes. It sure appears that arrogance breeds contempt for their customers.

How does a projected increase more than double? The opportunity to take a windfall profit must have been irresistible.

Any gasoline at my neighbourhood station was refined months ago. The companies’ mantra with all price increases is that they have to make the increases to reflect current market conditions because that is what they are going to pay for oil being refined for future use. Strangely enough, it seems the prices always rise faster than they drop. That probably has nothing to do with excess profit either.

I might be more inclined to believe what appear to be bald-faced lies but for two things.

First is that, according to news reports, the refineries in Texas were only offline for a few days. By the time the prices were jacked up some had started production again. (I won’t comment on what percentage of Canadian oil comes to us from Texas, that is a different issue altogether.) Given a production oversupply, I doubt a few days non-production causes shortages.

Furthermore, the price hike is excessive. Canadian retail prices were up about 35 cents a litre on Saturday. On the other hand, American prices, in an area far more affected, were up about 17.5 cents a gallon. That’s approximately five cents a litre. The only conclusion I can draw is that the oil companies are gouging Canadian consumers and making a huge windfall (pun intended) profit. I can only hope that they are making a huge donation to the Hurricane Harvey relief efforts. Certainly they can afford it.

The second thing that makes me appear cynical about oil and gas companies is the daily price pattern in my city. If you buy gas at the pumps in the morning it will cost you a lot more than it will in the evening, sometimes as much as 10 cents a litre. The price seems to fall gradually throughout the day, then between 11 p.m. and midnight goes back to the morning price.

In a free market economy with no discernible difference in product, price becomes important. I buy my gas wherever it is cheapest. It is suspicious therefore that when one station raises its prices they all do within minutes, rather than take advantage of increased traffic due to better prices. You understand this is “coincidence,” not collusion.

Having observed this behavior for years, you understand why I think we have been lied to by the companies about the effects of Hurricane Harvey on prices. They are ripping off the consumer, just because they can.

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One comment

  1. Well-written!

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