Gas prices in the Red Deer area remained low on Thursday, despite the carbon tax taking effect, because of a price war with Costco, says one expert. (Photo by LANA MICHELIN/Advocate staff).

Red Deer-area gas stations are “eating” the carbon tax to keep gas prices competitive, says an expert

But the price war with Costco won’t last, says Dan McTeague

The gas price hike — due to the carbon tax that started on Wednesday — didn’t materialized in Red Deer on Thursday.

Reg Warkentin, policy advisor for the Red Deer & District Chamber of Commerce, noted fuel prices were actually higher for a period before New Year’s Day, then fell, mystifying many motorists who were expecting to pay more because of the new federal carbon tax.

“It’s back to the regular games with gas prices,” he surmised.

A perspective to this conundrum was provided by Dan McTeague, president of Canadians for Affordable Energy, who believes a price war is keeping local gas prices low and causing service stations to essentially absorb the carbon tax — for now.

McTeague credits low fuel prices set by the Costco in Gasoline Alley for creating an atmosphere in which many service stations are willing to lose money on fuel sales in the short term to be competitive.

Costco charges 89.9 cents a litre for gas as a way of bringing more customers in to the store, in hopes they will buy other merchandise to offset the loss in gas profits, said McTeague.

If other gas stations sold their fuel at more realistic prices, they would risk losing business to Costco, added McTeague, who believes local stations would rather sell at a loss in the short term than have no business at all.

“They are hoping to sell a lot of beef jerky,” meanwhile, he wryly added.

While the 94.9 cents a litre offered on Thursday by most local gas stations isn’t quite as low as Costco’s gas price, it’s still a couple of cents below their break-even point — especially when factoring in the additional carbon tax, he added.

Since Jan. 1, an additional 4.4 cents a litre was added to Alberta’s gas prices as an incentive to reduce the energy consumption that experts have linked to climate change.

Gas stations are, for now, opting to “eat” the tax to stay competitive, but “it won’t last,” McTeague predicted, so motorists should enjoy the price break while they can.

Many Red Deer-area residents see the carbon tax as another government money grab, providing no real incentive to keep people from driving unnecessarily.

Warkentin believes the tax would have to be much higher to adequately affect behaviour change.

But then politicians would have to consider the implications of a big slowdown it would cause to our economy, he added.

“Driving is such a cultural thing for us,” said Warkentin, who believes paying 4.4 cents a litre extra will not be a huge deal to most people when the tax is passed on to Red Deer-area customers.

McTeague believes the carbon tax would have to be 50 cents a litre, instead of under five cents, to make people consider reducing their driving. But increasing it that much would be a “reckless” move for any politician who wants to get re-elected, added the former Ontario MP.

He said it would be wiser for the government to look at industrial incentives as a way of further reducing greenhouse gas emissions: “They should use a carrot approach, instead of a stick,” advised McTeague, noting the energy industry has reduced emissions by 30 per cent since 2005.

Red Deer resident Breanne Wilson noticed gas prices were lower than she thought they would be, when fuelling up her vehicle Thursday. But even when they go higher, she didn’t think it would have much impact.

“I’m pretty neutral on (the carbon tax)…I don’t do enough driving to be really upset about it.”



lmichelin@reddeeradvocate.com

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A man fills up his truck with gas in Toronto, on Monday April 1, 2019. Statistics Canada says the annual pace of inflation heated up in November as gasoline prices posted their first year-over-year increase since October last year. THE CANADIAN PRESS/Christopher Katsarov

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