by PAUL RAYNER

The one positive in the present economic difficulties has been the drop in gas prices. Whether or not they will be permanent and whether drops might benefit the rest of the economy is anyone’s guess.

The financial crisis this past fall had a negative impact on the stock market, which had a predictable impact on crude oil prices. Not long ago checking in at considerably more than $100 a barrel, oil prices began to plummet. With a few rallies in between, the price of a barrel of crude oil stood at $55.83 mid-week.

This came with a drop in gas prices as well. On Wednesday, November 12, the price of regular unleaded at the Boissevain Co-op C-store was at 95.9 cents per liter. According to general manager Karen Harilstad, who said she noticed the prices going down a few weeks ago, they were as high as 136.9 per liter before the drops. Changes in price at the cooperative, she said, is due to a number of factors, including their own costs.

“Nothing is cut and dried,” Harilstad explained. “We know what our costs are, but to say one thing affects it is impossible. Overall, it’s driven by the drop in oil prices as far as I can see. We’re such a small player. We’re not an OPEC country.”

“When the prices are high, it definitely increases our costs as well, through the vehicles we drive.”

Higher prices also impacted their marketing strategy.

“There is more focus on in-store sales rather than gas,” she explained. “That is more where the marketing focus is. That is not just in the Co-op, but it’s industry-wide.”

Changes in fuel prices affect different industries as well. Trucking, for one. According to George Dyck of Du-Rite Motors/N.E.W.S. Enterprizes, when prices went up, they dealt with it immediately.

“It didn’t affect us too much,” Dyck stated. “Right off the bat we told customers we couldn’t absorb it. We said we would provide the usual service, but not stick to the old price.”

As an illustration, Dyck said a load to Toronto that cost $2600 before might cost $3600 with the higher fuel prices. He said they dealt with it that way instead of extra surcharges because it was more honest and people are more accepting of it that way. He said they phoned customers with new rates, did hit some resistance, but most called back when they found other companies had similar rises in rates.

“We figured a rate for ourselves, and it may have hurt us at first but most came back.”

Although oil prices have dropped, and gas prices have moved downward, Dyck has been frustrated with the lack of positive movement on diesel fuel, the backbone of trucking. He said it has dropped somewhat, but it remains higher than gasoline, a strange anomaly as diesel is usually lower.

“The reason it is still so high, I struggle with that,” Dyck stated. “The oil has dropped so drastically, but diesel is still at 1.20 to 1.30 a liter around here, I don’t know why.”

N.E.W.S. is a trucking company that takes loads all across Canada and the United States. He and his drivers have noticed the enormous difference in prices in different jurisdictions. As of November 10, he said diesel prices in Winnipeg were hovering around $1.12 a liter, while they were $1.02 in parts of Ontario, and $1.16 in Abbotsford, BC. In the US, they are even cheaper, with Texas, for example, being at $3.07 per gallon. Once the measurements are taken into consideration (four liters per US gallon), it is about a dollar cheaper in the US before the exchange rate.

“Everyone is different. There does not seem to be a lot of control.”

Harilstad said differences in jurisdictions are difficult to understand.

“That I can’t answer,” she said. “Why are bananas cheaper in Brandon than here. We all set our own prices. There are so many different factors to take into account.”

One of the ways Dyck said they try to help their fuel costs is to offer incentives to drivers to get the best prices. For example, he said, Flying J is usually cheaper than the others, so they offer drivers a 2 cent a liter incentive to fill up there. He said if they are using 600 liters a day, that means an extra $12 a day for the driver.

“We don’t tell them they have to,” he said. “It is their choice. They just don’t get the incentive. Before they leave, they study it good; they see where they can get the cheaper fuel in Wisconsin, etc. There are some real differences there.”

One area of concern is the discrepancy in the relationship between gas/diesel prices and oil prices. When oil goes up, the gas prices go up with it. It seems that when crude drops, however, fuel prices do not go down at the same pace.

“It is beyond me how they do that,” Dyck stated. “The oil price is dropping like crazy, yet the price we pay is not down that much. I struggle with that.”

Harilstad said that she was not sure exactly what the reasons for the discrepancy. She did say 2008 was an unusual year in Western Canada, with a number of refineries shutting down production at different times. This impacted the supply, which might have kept prices up. At any rate, is the difference real or a consumer illusion?

“That is a good question, is it an illusion or not,” Harilstad said. “It was a different year with the shortages, but it can be hard to tell.”

Dyck said they continue to work around the problems. By slowing down on the road, he said, their drivers do not only save fuel, but maintenance as well.

“We stay on top of it,” he said.  “As a small company, you have to.”

Harilstad said the Co-op has yet to see savings on fuel prices in regards to their own vehicles, but added that their financial statements are usually a few weeks behind, so it can be difficult to tell.

There are hopes that dropping fuel prices will have a positive impact on the rest of the economy. Although not true for the oil business, dropping the price of transporting goods and people might spur some growth and mitigate some economic woes. Dyck said he feels the prices will continue to decline, and along with realistic economic goals, it might help out.

“We’ve gone through a cycle, and people’s expectations have to become more realistic. We have to rebuild somewhat in Canada and the US. I think it will help to get the fuel prices down. I know it makes us breathe a little easier.”

Harilstad did not think lower fuel prices would hurt the situation. As for the prices dropping further, she was unsure.

“Hopefully, they can sustain it (dropping prices),” she said, adding she was unsure whether we would ever see prices drop below $1 a liter again. “I can’t predict how low they will go. I broke my crystal ball.”