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‘Big box’ players gain increasing control of gas pump prices

These are stories Report on Business is following Monday, June 10, 2013.

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'Big box' players gain increasing control of gas pump prices
A new study illustrates the growing influence on gas pump prices by players other than Big Oil, and why some Canadians are paying more than others.

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Regional distributors and "Big Box" markets are gaining an ever-greater say, says the annual study by MJ Ervin & Associates as the oil companies play a lesser role.

Prices at 23 per cent of all gas stations in Canada are controlled by nine refiner-marketers, the study says.

"The remaining 77 per cent of all gas stations in Canada are price-controlled by individual outlet proprietors or non-refiner markets, a diverse genre of petroleum marketers, whose importance and influence is growing, particularly among two sub-types: Regional distributors and Big Box marketers," said MJ Ervin, part of The Kent Group.

"The latter in particular have an influence on the retail petroleum market – particularly in terms of price competitiveness – that is far out of proportion to their relatively small numbers of outlets."

Canada was home to 12,285 gas stations by the end of last year, or 3.5 for every 10,000 people, though that's different for each province, of course.

"This has a strong relationship to 'throughput efficiency' by province, which in turn has significant implications with the level of retail markup in each province's markets," MJ Ervin said.

"Markets with poor (low) throughput efficiencies tend to have higher retail gasoline prices (after tax differences are factored out) than those with high throughput efficiencies," the study added, noting there were 20,000 gas stations in 1989.

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Big box players are those such as Costco and Canadian Tire.

Big Oil's representation in retail selling has been on the decline as the three major players, Shell, Suncor and Esso, now directly control prices at just 14 per cent of the gas stations.

"We have seen virtually no increase in the retail gasoline margin in over 25 years," said the research firm's Michael Ervin.

"Retail gas stations are no longer seen as a strategic asset for integrated oil companies," since refiners typically have ongoing gasoline supply agreements with several third-party retail chains who themselves do not operate refineries."

The big box group has gained in influence over the past 10 years, according to the study, and, "through competitive pricing and other incentives, has contributed to the overall decline in 'conventional' gas stations."

S&P boosts outlook for U.S.
Standard & Poor's, the U.S. ratings agency that knocked the United States for a loop two years ago when it stripped the country of its triple-A rating, now says things are looking up.

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S&P held its ratings steady today, but boosted its long-term outlook to "stable" from "negative," citing a better outlook on the both the economic and fiscal fronts.

"The stable outlook indicates our appraisal that some of the downside risks to our 'AA+' rating on the U.S. have receded to the point that the likelihood that we will lower the rating in the near term is less than one in three," S&P said.

"We do not see material risks to our favourable view of the flexibility and efficacy of U.S. monetary policy," it added.

"We believe the U.S. economic performance will match or exceed its peers' in the coming years. We forecast that the external position of the U.S. on a flow basis will not deteriorate."

Condos drive housing starts
Canadians, it seems, still haven't had enough of condos.

Residential construction starts jumped in May to an annual pace of 200,178 units, from 175,922 in April, The Globe and Mail's Tara Perkins reports.

That, Canada Mortgage and Housing Corp. said today, was juiced by a 22.2-per-cent climb in multiple units in urban centres, which could spark renewed fears where the condo market is concerned.

"May's increase in homebuilding suggests overall housing construction continues to garner support from condominium-related building, although the overall levels are still off from the highs seen in mid-2012 when the market was more frothy," said economist Emanuella Enenajor of CIBC World Markets.

"Today's data could mean that homebuilding activity in Q2 could be less of a drag than seen in the prior quarter, although we continue to see this sector struggling on weak secondary market activity, the fading impact of low rates and buyer fatigue."

OMERS, AIMCo in European deal
Two Canadian pension plans have teamed up to take over Vue Entertainment, one of the biggest cinema chains in the world, The Globe and Mail's Tara Perkins reports.

The deal, by the private equity arm of Ontario Municipal Employees Retirement System in partnership with Alberta Investment Management Corp., puts a $1.48-billion enterprise value to Vue, which has theatres in the United Kingdom, Ireland, Germany, Denmark, Portugal, Poland, Latvia, Lithuania and Taiwan.

How Dad rates
What a coincidence.

Just yesterday, I suggested to my wife that, for Father's Day, I might like a 16-GB iPod Touch, which costs $229.

Then today, Bank of Montreal released a survey showing Canadians plan to spend an average of $95 on their dads, which means I'll be doing far better than the other guys on my street. But, hey, I'm worth it.

According to the Pollara poll, 94 per cent of the people who plan to spend for Father's Day this Sunday will boost the average from $86 last  year.

(I'm not sure what's with the other 6 per cent.)

The folks in Alberta and British Columbia will spend the most, at $116 and $101, respectively, while those on the Atlantic side will spend the least, an average $61. Ontario and Quebec are at $94 each.

And here's a key piece of information: BMO's earlier Mother's Day poll showed an average $107, or $12 better than Dad.

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