Cochranites are certainly fuming about the cost of gas at our local pumps these days, and why such a disparity of price exists between communities.

Dan McTeague, Senior Petroleum Analyst with GasBuddy shares some insight on the 'why' of higher gas prices. "Whether you are a Cochrane or Calgary gas station it is costing you a $1.14 today to buy your gasoline so how do you sell it for $1.08?"

McTeague shares while he can certainly understand the frustration of Cochrane community members, he says this is not a unique situation. "This is normal. If you are a gas station today and you offer to pay by credit card or a form of a rewards program it will cost me $0.03 right off the top, and it's not the credit card or the bank paying for it, it is the actual bottom line of the gas station owner. So if your wholesale price today with tax all in is $1.14, how do you sell it for under that amount?! Unless of course, you have a combination of a big retail store that can offset the cost and use gasoline as a loss litre or you are in an ultra, super competitive environment like we see in Calgary where you definitely are not making money selling gasoline. Those stations are making money by selling more coffees or selling more premium gasoline because they can make more money at that, or you are getting support from your supplier or dealer. That is the only way in which you survive in a market like Calgary; whether it's Cochrane, Medicine Hat or Lethbridge, prices in many places are in the $1.24 range. I hate to say it, but that is where they should be with no one losing their shirt."

McTeague shares while he can understand the frustration of community members, at the end of the day, boycotting our local stations only ends up hurting the local retailer. "Understand the benchmark is pretty transparent. If you are a gas station and you are selling for under $1.14, as much as we want the lower price, what is the catch? You have to be doing something to make up the difference. You can't sell gasoline, pay your electricity to turn on your gas pumps, pay your overhead which includes your labour, look after and pay the municipal taxes for running the site, much less the entire infrastructure including delivery cost, tank terminal cost, cleaning cost without having some other way of subsidizing the loss. Most gas stations in Canada have a margin of between $0.06 and $0.10/Litre; what I am seeing in Calgary is minus $0.06, minus $0.07 and they are basically just giving gasoline away, and the question becomes how are they able to do it?"

There are a couple of things to keep in mind, shares McTeague. For one, Calgary gas stations are able to replace their inventory far more quickly than a Cochrane station is able. "Think of it this way, if the price drops tomorrow by $0.04/Litre the gas they are selling tomorrow was bought last week at $0.08/Litre more. In Calgary, their storage tanks are emptied every two days, here in Cochrane it might be every week if they are lucky. It means last week's higher prices they still have to pay for, and they are holding inventory from that week. It also works the other way too. When prices start to go up radically, you will find that in many smaller communities they may not put it up as quickly and will often wait a day or two because they are dealing with cheaper inventory. In my experience that has been the case, not necessarily in Cochrane, but to a large extent small towns tend to hold on to lower prices in an environment where prices start escalating, and they get no credit for that."

Two, as McTeague digs into retail costs in some other Southern Alberta communities, he finds something interesting. "In Banff, it is $1.22 for regular but when I look at their premium it is $1.42. The difference across Canada wholesale between regular and premium gasoline is $0.10/Litre and they are getting $0.20, so they are picking up a dime. It all comes down to the retail margin because there isn't a lot of competition left on the wholesale side. There comes a point where you can't keep selling gasoline below cost or you won't be in the business of selling gasoline for much longer."

On a positive note for consumers, McTeague thinks prices are going to fall dramatically over the next couple of weeks. "Tomorrow the wholesale price of gasoline collapses $0.04/Litre and will likely fall another $0.02/Litre on Sunday, so we could be looking at $1.17 or $1.16. The reason prices are falling is everyone is apoplectic and scared over what Trump is doing in respect to terms of trade. He is killing the market and at this rate, we are headed into a global recession. So while the short term good news is cheaper gas prices, the underlying message is actually pretty frightening."

If you would like to learn more, McTeague invites anyone with questions or concerns to contact him directly at 1-647-220-0114. "I feel bad for some of the retailers there (Cochrane). I understand people's frustration, but if I could explain it, most people will come to the conclusion they aren't being ripped off. My job isn't to defend the large or small independent, it is just to say these are the numbers. We would all love to see prices come down to be more competitive, but how do you do that when you are still stuck with inventory and prices from last week?"