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Gas hike a matter of profit over loss

Gas prices in the Okanagan have jumped as much as 11 cents per litre over the past 24 hours.

Prices had dipped as low at $119.9 before jumping to the current level of $130.9.

Former Liberal MP, Dan McTeague, founder of TomorrowsGasPriceToday.com, says Thursday's price increase had to do with retailers trying to keep their heads above water.

McTeague says retailers in the Okanagan were barely breaking even or taking a loss when gas prices were around the $120 cent a litre mark.

According to McTeague, when taxes are factored in, retailers are paying about $1.18 for a litre of fuel.

"It takes at least five or six cents a litre over and above the wholesale price on top of your taxes, to make your business viable," says McTeague.

"What you saw there, very temporarily at $1.19 in Kelowna was below cost selling. In other words, the retailer was not getting anywhere near that five or six cents a litre."

He says while the consumer may not appreciate the higher price at the pumps, McTeague says below cost selling strategies tend to eliminate the competition.

"It doesn't happen very often but it did happen and that's why the adjustment occurred yesterday morning."

McTeague says wholesale prices have jumped about four cents a litre over the past few weeks.

"That's a reflection of refiners scrambling to make sure they produce enough diesel because there is a shortage of diesel in many parts of Canada particularly outside of British Columbia heading east."

McTeague says gas retailers in Kamloops pay the same price as retailers in the Okanagan for a litre of gas.

The difference he says is places like Costco keep the price down to entice shoppers.

"They don't care. They use gasoline as a lost leader. Your independent mom and pop, unless you are selling a lot of potato chips and smokes, you're not making any money."

As for what this means down the road, McTeague says he's not sure because he doesn't know the reason for the dip in the Okanagan in the first place.

 

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