OTTAWA, Ont. -- The Canadian Competition Bureau has concluded its examinations of high gasoline prices following Hurricane Katrina and allegations by independent retailers of predation and margin squeezing in the Canadian gasoline industry. "We have found no evidence of a national conspiracy to fix gasoline prices," said Richard J. Taylor, deputy commissioner of the Competition, Civil Matters Branch. "Severe damage to North American refining capacity caused by Hurricane Katrina forced gasoline prices to spike in September 2005. This dramatic reduction in supply forced wholesale [image-nocss] prices to jump, resulting in higher prices at the pumps.
While crude oil prices remained relatively stable, the Bureau found that gasoline supply was significantly reduced following Katrina. The supply reduction caused a spike in the New York Harbour spot price for gasoline, which Canadian refiners use to determine their wholesale prices. This spike forced wholesale, and ultimately retail prices, to increase in Canada and the United States.
The Bureau also examined allegations from independent retailers of predatory pricing and margin squeezing in the gasoline industry especially in Ontario and New Brunswick. The complainants alleged that the refinery-owned retailers were reducing gasoline prices below their cost in these areas during certain periods and also charging higher wholesale prices to independent retailers who compete with their outlets at retail, causing profit margins to shrink.
The Bureau investigated these matters under section 79 of the Competition Act and found no evidence that pricing resulted from an attempt by a group of majors to discipline or eliminate the independent retailers in these markets, either through predation or margin squeezing.
In conducting its examination, the Bureau gathered information from publicly available resources, as well as direct contact with market participants who provided proprietary data. The Bureau also retained a consulting firm to understand the key determinants of profitability for retail gasoline stations. The independent report, What Determines the Profitability of a Retail Gasoline Outlet? A Study for the Competition Bureau of Canada, found that retailers are relying on higher volumes and ancillary services such as convenience stores and car washes to earn profits.
Click here for the full report and additional information.
http://www.competitionbureau.gc.ca/internet/index.cfm?itemID=2047&lg=e
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