Gas stations selling under $1.52 a litre are taking losses, making money elsewhere

Gas stations in Calgary selling fuel below cost are banking on convenience store sales and premium-fuel margins to compensate for losses at the pump, says Dan McTeague, president of Canadians for Affordable Energy.

As of Thursday, the cheapest prices in Calgary were at the Costco station along Buffalo Run Boulevard at $1.52 per litre, followed by two Tempo locations at Bow Trail and Dalhousie Drive at $1.54. The actual cost for stations to replace the fuel they're selling is between $1.60 and $1.61 per litre.

"So depending on the price you see, you can pretty much judge what the difference is," McTeague said. Prices under the wholesale threshold either have discounts from suppliers or charge higher prices for in-store products or premium gas and diesel. The fuel rack price in Calgary sat at 139.6 cents on Thursday; if stations only tacked on the 13-cent provincial tax, they would be selling fuel at no retail markup—landing at $1.52 per litre.

McTeague described the strategy as outdated. "I used to refer to this many years ago as 'gas bar shenanigans,' where they try to outdo each other, outwit each other by losing money selling gasoline and making more money selling pop, chips and smokes," he said. "That's not a way to run a business and that's one of the reasons a lot of these gas stations either fail or have been taken over by large, competing stores."

Imperial Esso has either sold their gas stations or convenience store portions to Circle K, McTeague noted. Gas stations increasingly rely on other revenue streams—groceries, price differences between premium and regular gas, convenience items. In Edmonton, where wholesale gasoline sits at $1.33, premium at $1.57 gives stations a 33-cent margin to subsidize losses on regular fuel.

"Gas stations will see other gas stations doing it, so they don't want to lose volume because people will always shop at the place they can find it," McTeague said. "The cheapest gas is gas. But some will have an advantage over others and be able to offer gasoline below cost in order to sell more other products."

Prices remain at least 40 cents higher than last year. When winter-blended gasoline kicks in, McTeague expects prices to drop between 8 and 10 cents per litre.