Well, the Family Day long weekend is upon us and gasoline prices here in Thunder Bay have spiked up again. Last week, gasoline in Thunder Bay was about $1.17 a liter and right now it is about $1.30 though prices are a bit lower on the south side of town. Thunder Bay's prices have been among the highest in the country for some time now.
I decided to do some urban comparisons on monthly gasoline prices (regular unleaded at full service filling stations) using Statistics Canada data for 18 Canadian cities for the period 1979 to 2011. I calculated the “national average price” for these 18 cities and then the regional averages for the Atlantic, Quebec, Ontario, the Prairies and British Columbia. The national average price per liter in 1979 was 23.6 cents and it rose to 59.2 cents in 1990, reached 63.6 cents in 2000 and was 126.2 cents in 2011. In 1979, prices tended to be highest in Atlantic Canada, followed by Ontario, then Quebec, British Columbia and then the Prairies. By 2011, prices tended to be the highest in British Columbia, followed by Quebec, then Atlantic Canada, Ontario and the Prairies.
I plotted the ratio of the regional average price to the national average price and present it below. The graph shows much more dispersion in the ratios prior to 1993. Prior to 1993, Quebec and the Atlantic provinces were often 10-20 percent above the national average while the Prairies seem to have been about 10-20 percent below. Since 1993, the ratios of the regional averages to the national average have been in a much tighter band. I guess my questions are as follows. Without engaging in econometric testing for structural breaks, why would 1993 mark the start of such a visual break point? Does a tighter range around the national average since 1993 mean that gasoline markets in Canada have become more “efficient” and eliminated some of the regional price differentials that existed with better distribution? Or, does the tighter range mean that gasoline retailers have more market power and have eliminated price fluctuations due to regional market differences? Perhaps there is another story. I don’t have an answer.