A reader from York Region asked me why gasoline costs less in Ottawa than it does in Toronto.  Here is my reply:

There are really two reasons why Ottawa has lower prices than Toronto.

The first is that Ottawa enjoys vigorous competition at the retail level, with many independent retailers using their access to terminals on the St Lawrence Seaway to force competition.  These terminals are not controlled by Esso, Shell, Sunoco (which now owns Petro-Canada), Ultramar or, Irving.

In fact there are still two refineries in Montreal (for how long is a good question), one in Quebec City, and one in New Brunswick.  Together these refineries provide a more than adequate supply for the eastern Canadian market.

Toronto is the complete opposite of Ottawa – with few independent retailers left.  Most, if not all, independents have been squeezed out over a decade ago by major refiner/marketers. This was achieved compliments of a Competition Act written by lawyers representing Canada’s largest players in the oil industry, and has allowed the Competition Bureau to turn a blind eye to predatory pricing.  These pricing schemes temporarily denied independents any margin on which to operate. This practice is illegal in the US, but perfectly acceptable in Canada.

The second reason is less complex. Toronto has no refineries and therefore relies on supply controlled by only 3 players: Esso, Shell and Sunoco.

They can, and do, charge whatever price they wish secure in the knowledge that Toronto is trapped, with no ability to weaken this tremendous grip on price control and discipline at the pumps.

Further proof lays in that the retail margin in Ottawa being traditionally 2-3 cents cheaper than Toronto’s 7 cents for regular, and a wholesale price that is normally 1 or 2 cents cheaper.

Further evidence can found if you look at the difference between regular and premium blends. Even though the wholesale price of premium is 5 cents above regular, the monopoly in Toronto can charge 13 cents, not 7-9 like Ottawa.