MEDIA FUELLED THE `GAS PANIC' No reason for frenzy, station operators say Thomas Walkom – Toronto Star A day after the great gas panic, Toronto service station operators are shaking their heads in bewilderment.
They say there's no shortage of gasoline in Ontario refineries. Those that are running out of gas (and some still are) say that's because, thanks to consumer panic, the delivery trucks which are supposed to refill their underground tanks just can't keep up.
All of the stations I surveyed in downtown and east-end Toronto yesterday were still selling gas at about the same price they were charging the day before — somewhere between $1.02 and $1.07 a litre.
The price of a barrel of oil, which is supposed to ultimately determine what motorists pay, has been dropping. And, in spite of the potential threat to Gulf of Mexico refineries posed by Hurricane Rita, so has the wholesale price of gasoline in the U.S.
So what happened? Where did what the Star yesterday called "gas panic" originate?
For Omar Albar, an attendant at Eastern Auto Gas on Eastern Ave., the media are to blame.
"The media were making people crazy. People would come in and say: `I've heard it's $2.10 in Guelph' and they'd start panicking.
"Otherwise, there was no reason."
Zafar Khokar, manager of the Esso franchise at Front and Sherbourne Sts. makes the same point.
"It was because the media fuelled the hype so much. It was all media. Every 10 minutes on 680 News (a Toronto radio news station that does constant traffic reports) they'd be talking about this."
Indeed, the panic does seem to have begun with a Canadian Press report out of Chatham — quickly picked up by radio stations —that an unnamed gas station there had raised its price to $1.75 a litre.
That was followed by reports of wild line-ups at service stations in Timmins, 800 kilometres north of Toronto. Those, it seems were the result of unfounded rumours that gasoline was about to hit $2.50 a litre.
By late afternoon Thursday, the line-ups were already getting out of hand in Toronto.
"We had to shoo people away," said one attendant at an East York Esso station. "It was on the radio. People were freaking out about the news. It was crazy."
In part, the events of Thursday represented a classic reaction to fear of shortages.
When fear of anthrax poisoning swept the U.S. after 9/11, frantic Americans stripped hardware stores of plastic sheeting and duct tape in order to germ-proof their homes.
More recently, fear of a world-wide pandemic is causing some families to hoard scarce flu vaccines.
If not always laudable, this is at least normal. Fear of want has always been a human constant. When this fear is fanned, people routinely attempt to stockpile whatever it is they think they might need.
But what really gave traction to this week's bout of rumour and panic was that almost no one has any idea how gas prices are set.
And in large part, that's because the oil industry is a very odd one.
At the production end, it is a not-always successful oligopoly. There are only a few big oil-producing states and there are even fewer giant oil companies.
Attempts are forever being made to set prices, most openly by the Organization of Petroleum Exporting Countries, a producer cartel.
Sometimes these attempts work. But often, they fall apart.
There's also a heavy dose of politics involved. This, too, affects the price of a barrel of oil, as national leaders try to juggle the needs of the powerful petroleum industry against those of their voters.
All of this makes ordinary consumers justly suspicious of how gasoline prices are set.
But the other end of the oil industry — the gas station end — is strangely, almost frantically, competitive (albeit in a quasi-monopolistic fashion).
This isn't because all gasoline retailers are independents. Most aren't.
A few are truly independent and buy gas from wherever they can. A few more operate franchises under the banner of the big producers.
These operators buy gasoline wholesale at prices set each day by their parent company. They then add a margin — in Toronto it seems to average about three or four cents a litre — and sell to the public.
But the vast majority of stations are owned outright by the big oil companies. Managers at these stations have no leeway over the prices they charge. Instead, prices are set at oil company central headquarters and relayed to the stations.
Yet nowhere is there is a single price for gasoline.
The same company may charge different prices for exactly the same gasoline with exactly the same cost of production in different parts of the country — and even in different parts of the same city.
The criteria behind this differential pricing vary. Sometimes it's income. That's one reason why gas usually costs more in Oakville than Toronto, even though Oakville is closer to the refineries.
Sometimes, it's volume of traffic. Sometimes, it's even time of day.
Company-owned stations on Overlea Blvd. in Thorncliffe Park, for example, tend to raise their prices each morning and drop them each evening — all for the same gas.
But whatever the criteria, the aim is constant: to charge a price that will generate as much revenue as possible without driving customers away
If gas stations on Bayview Ave., for instance, charge too much, then even BMW drivers might drive to seedier sections of town where the prices are better.
Balance is everything.
For franchise owners and independents, pricing is even trickier. They can't charge less than their costs — or at least not for long. So their bottom price is set by the wholesale cost to them of gasoline.
Like company-owned stations, they face no upper bound. Theoretically, they can charge whatever the market will bear.
But in practice, most find it too difficult to calibrate their prices that precisely. Mike Johnson, manager of an East York Esso franchise, says he's told his wholesale cost each day and sets the retail price three cents over that.
When the panic buying started happening on Thursday, he just kept to that formula and didn't raise his prices.
Others keep prices steady to attract regular customers. They don't drop prices as much in the dips nor do they raise to the same extent them during times of peak demand
"For us, gasoline isn't our main business," says Maurizio Meglio, co-owner of Greenwood Auto Centre on Greenwood Ave.
"People buy gas from us and then they say, `Hey, maybe I'll get a brake job."
So Meglio didn't raise his prices during the Thursday panic.
"We have regular customers," he says. "People remember." |