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A05-Kathryn #1

LOCAL
MOST EVERYTHING YOU MIGHT WANT TO KNOW ABOUT GAS PRICES

THE HAMILTON SPECTATOR SATURDAY, SEPTEMBER 3, 2005

A5

Yes, the price of gas can keep going up, up...
BY JACQUIE DE ALMEIDA and MELISSA MEWDELL

Q. How high can gas prices get? A. The sky is the limit. So long as there is short supply and ample demand, gas prices will rise. Marvin Ryder, professor of marketing at McMaster University’s DeGroote School of Business, explained that energy is an inelastic product, meaning demand for it stays fairly constant regardless of price. In theory, no matter how much gas costs, people will still buy it. Q. Will the price come back down? A. Experts say the spike in gas prices over the past week is partly based on strained gasoline refinery capacity in the Gulf of Mexico and less gasoline available on the world market. Oil refineries were shut down in and around the Gulf of Mexico a day or two before hurricane Katrina rocked the area. Prices should start to drop once refineries get back online. The demand for gas is also seasonal and prices tend to increase during the summer months when demand is higher and refining capacity is at its maximum. Drivers could see the cost of gas decrease in the fall when demand for it also drops. Q. Is this the largest increase in history? A. No. While prices have been steadily increasing over the past few years in the United States, gasoline prices actually doubled to $1.76/gallon from $0.88/gallon from 1979 to 1980. Canada experienced a similar trend. In comparison, it’s taken almost eight years for gas prices to double to what they are now. Q. What makes up the price of a litre of gas? A. The largest component of gas prices comes from the price of crude oil. It accounts for

42 per cent of the price of gas and is affected by changes in global supply and demand, geographical and political events and inventory levels. Taxes make up the next largest component of gas prices, and account for about 39 per cent. Refining and marketing costs, which include all the costs that are used to manufacture, transport and market gas, are 17 per cent of the price. Lastly, profit is roughly 2 per cent of the price. Q. What do increased gas prices mean for federal and provincial tax revenue? A. Federal gas tax at 11 cents a litre and provincial gas tax at 14 cents a litre are not a percentage of the price and therefore won’t increase with the price. However, GST on gas is calculated as a percentage of the total of the price of gas plus the taxes. So, while gas taxes won’t increase, the amount the federal government collects as GST will, as gas prices rise. Q. What other products might increase in price due to higher gas prices? A. Consumers can expect to see any product that requires shipping to increase in price with higher gas prices. Q. Will buses, taxi cab and air fares go up? A. Fares may go up if high gas prices persist. Since the increase in prices is due to less refinery capacity, it’s unlikely prices will stay at these levels long enough to change prices of fares for airplanes, taxis and buses. Airlines usually have several weeks worth of gas in reserve, said Ryder. This means if the price hike is short-lived, airlines won’t feel the pressure to add another surcharge to fares. However, if the prices persist, it’s likely airfares will go up. Last June, Air Canada increased its prices by $8 to $15 per ticket, depending on the distance travelled to cover more expensive gas prices.

SIXTEEN MONTHS IN THE LIFE OF A LITRE
April 28, 2004 May 18, 2004

gallon. All prices are in U.S. dollars. Q. Where is the most expensive gas in Canada? Where is the cheapest? A. Alberta tends to have the cheapest gas prices in Canada because drivers don’t pay as much in taxes. In the Maritimes and Quebec, it costs more at the pump. Gas prices hovered around $1.14 a litre in Calgary yesterday, while in Halifax, it cost as much as $1.39. Montreal topped the list at $1.47 a litre.

Aug. 31, 2005

Q. How long does it take for gas to get from the ground to the pumps? A. It takes about three to six months for oil to get from the ground to your tank. Aug. 9, 2005 Q. Do you save money buying $5 worth of gas? A. No. Experts suggest you top off your tank if you spot a good price rather than waiting until you’re out and forced to fill up. Companies that buy large amounts of gasoline like airlines tend to get the most savings because they buy on contract at a set price. Q. What was the price of gas in 2001? A. In January of 2001, gas prices were 69 cents a litre. Q. Why doesn’t the government control the price? A. The National Energy Policy introduced by then-prime minister Pierre Trudeau in 1980 tried to keep domestic oil prices low but it failed. The program — designed to help make Canada less dependent on foreign petroleum — cost billions of dollars and provoked an energy slump in the West because oil companies stopped drilling.
SOURCES: GEORGE INY, AUTOMOBILE PROTECTION ASSOCIATION PRESIDENT, MARVIN RYDER, MARKETING PROFESSOR, MCMASTER UNIVERSITY, CNN MONEY, CANADIAN PRESS, HAMILTONGASPRICES.COM, JON HAMILTON, CORPORATE COMMUNICATIONS, PETROCANADA

Taxi fares haven’t increased yet, but if prices persist, something will have to be done, said Anthony Rizzuto, vice-president of Blue Line Taxi. Rizzuto said the most effective way to increase prices would be through a surcharge, which can be reversed in case gas prices drop. An actual change in the fares would be difficult to implement because taxi fares are regulated by the city and would be hard to reverse if gas prices fell. The HSR has not introduced a fare hike yet. Q. What is the best way for drivers to economize fuel use? A. Drivers can cut back on their fuel use by keeping their vehicles in good condition. Engines burn less gas when tuned

up. Also, good tire pressure, and driving at consistent, slower speeds helps conserve gas. Car owners should keep their trunks junk free as excess weight can eat up gas. Also, leaving windows down while driving at highway speeds is a sure way to eat up more gas. It’s actually more economical to use air conditioning when driving at high speeds because open windows make cars less air resistant. Q. How much of our gas comes from the United States? A. On average, Canada exports twice as much gasoline, oil and natural gas as it imports, to keep transportation costs down. It’s easier to import supplies to Eastern Canada from other countries

than to bring it in from the West via a pipeline. Supplies in the west are exported south and to other countries, while in the east, Canada must import to meet demands. Most of what Canada imports comes from Europe, the Middle East and Venezuela but some comes from the U.S. Q. What is the price of gas in Saudi Arabia? Kuwait? A. The price of gasoline in Saudi Arabia in May was 91 cents a gallon and in Kuwait it was 78 cents a gallon. At that time, the average price of gas in the U.S. was around $2.25 a gallon and is now up to the $3 mark. The cheapest gasoline prices are in Caracas, Venezuela, where drivers can fill their tanks at 14 cents a

GAS: Drivers shocked, angry — and some truckers are desperate
Continued from A1

It was an equally tough gas day for Duane Corbeil and his coworker behind the counter at the cash register where Clark paid. “It’s been almost verbal abuse today,” a depressed-looking Corbeil admitted. “Yeah, like ‘You people should be shot, it’s all your fault, this is highway robbery,’” his co-worker added, too nervous to give her name. “You name it, they’ve said it,” Corbeil agreed.

Ken Bucknall stalked in, having just filled up his eightcylinder Mustang GT baby. “Twenty cents overnight?” he snorted. “Unbelievable. I think this sucks. It’s just ridiculous what they’re doing. It’s total gouging.” At 20, Sabrina Ramlall has only been driving for two years, but yesterday’s gas price hike left her yearning for the good old days of 89 cent a litre gas. “This is horrible,” Ramlall said, cutting off the gas flow when she hit $20.

“That’s all I can afford to put in now when gas is $1.34,” she said. She’d have to do things differently now, she said. No popping into the car for a quick drive to get coffee. But Ramlall said she has to drive because taking public transit to work in the city means more than an hour on a bus. “I’m in shock … I’m between a rock and a hard place.” For truck drivers, the jump in diesel prices feels as if they’ve been run over by their own rigs. “Fuel’s going up, but rates are

not going up,” fumed Wayne Cannon, a transport owner operator. “It’s gone from $900 to $1,800 a week for fuel. It’s doubled for the same bloody run.” Fellow Hamilton trucker Corby Jensen, owner of Lor-Cor Inc., said the big rig drivers are fed up with firms unwilling to pay more to haul goods when fuel costs undergo an almost exponential increase for them. The drivers are getting desperate, said Randy George, out of Tillsonburg. “I know one guy who just

bought a beautiful Peterbilt. He handed in his plates yesterday. He couldn’t pay his fuel.” Meanwhile, Stoney Creek independent gas station owner Ahmed Raza said the government must step forward. “It has to fix this problem,” the Petro V Plus owner said. Customers are reacting angrily to the prices, he said, not so much at the gas bar operators but at a government unwilling to bring relief by slicing gas taxes. And he’s hearing more and

more about “pulloffs” in Hamilton where drivers pump and then flee without paying. “I thought Canada had its own natural resources,” said a disgruntled Brian Bezemer, a Hamilton printer. He pumped 74.5 litres into his pickup. It cost him just over $100. “If I didn’t need this truck for work, I wouldn’t be driving it,” he said. pmorse@thespec.com 905-526-3434

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