Gasoline Prices and the Public Interest
The Consumer Advocate's Report on Gasoline Prices
in the Province of Newfoundland and Labrador
APPENDIX "A"
STUDY ON GASOLINE PRICES
PROVINCE OF NEWFOUNDLAND AND LABRADOR
QUESTIONNAIRE TO THE INDUSTRY
A. RETAIL SECTOR INFORMATION
I. On a separate return of information for each outlet (Form No. 1 as provided), please provide the following information concerning your operations in the Province of Newfoundland:
- The location of any outlet supplied with product by your company at any time since January 1, 1993.
- The number of years the outlet has been in operation together with a description, where appropriate, of any major changes in the type of facility or method of operation of the outlet since January 1, 1993.
- The type of facility (ie. self-serve, full serve) together with a description of any ancillary operations (ie. service bays, restaurant, convenience store, etc.).
- Describe the method of operation of the outlet (ie. company operated, cross leased, independent operator, etc.).
- A listing of the type of petroleum products sold at the outlet (ie. regular, unleaded, premium, etc.).
- The volume of products sold for each product in each year for the calendar years 1993, 1994, 1995, and 1996.
- The retail pump price paid for each such product on the first working day of each quarter since January 1, 1994.
- Provide information concerning the chain of distribution that is used to supply the outlet starting at the refinery level. Also, provide any information concerning any major changes that have been made in the chain of distribution for this particular outlet during the last four years.
II. Please provide a copy of a sample contract for the establishment of the contractual relationship between your company and:
a) cross leased outlet;
b) commission/agent operated;
c) key lock and card lock customer accounts;
d) independently operated; and
e) company operated.
III. Please provide information concerning whether your company provides price support payments to any of your outlets and, if so, under what conditions such price support payments are provided.
B. CRUDE OIL SUPPLY AND WHOLESALE DISTRIBUTION
1. What is your source of wholesale gasoline?
2. How do you manage your inventory evaluation (ie. LIFO, FIFO, etc.)?
3. Generally what, if any, time lag is there between a change in:
a) the cost of crude oil and your rack price (rack price is defined as the price paid at acquisition of gasoline product at the wholesale level prior to supplier transportation costs and mark ups);
b) the rack price at acquisition and the retail pump price.
4. Do you operate any bulk storage facilities in the Province of Newfoundland?
a) If yes,
i) please describe where each of these facilities are located and to whom the product from these bulk facilities is sold;
ii) describe the mode of delivery and shipper for product distribution from point of rack acquisition to your bulk facility;
iii) the cost of transportation expressed in cents per litre for delivery of product from point of rack acquisition to your bulk facility.
b) If not from whom do you obtain product and under what arrangements (ie. purchase exchange agreements, etc.)?
5. Describe any major changes that have been made to your bulk storage facility operation in the Province which have occurred during the last five years.
6. What is your transportation cost expressed in cents per litre per kilometre for delivery of product from each bulk facility to outlets in that bulk facility's distribution area?
7. Who among yourself and outlet operators bears the cost associated with product shrinkage during delivery from the bulk facilities?
8. What is the rationale for the difference in cost at the retail level between the pump price of regular unleaded gasoline and premium grade gasoline products?
C. GENERAL INFORMATION CONCERNING YOUR OPERATIONS
1. Is there a targeted retail margin for the individual outlets operating under your distribution system? If so, what is this target and what does your company plan to do over the next five years to reach this target if it hasn't already done so?
2. Describe the nature, use and rationale for any geographic zones or region based system for your company's:
a) distribution operations;
b) retail pump pricing.
3. Does your company employ geographic zones or region based distribution or pricing systems for its operations in other provinces in Canada?
4. Please provide an estimate of the total cost of investment, including land acquisition, construction and compliance with all environmental laws, expressed as a fixed capital investment in plant relating to the opening of a new gasoline retail outlet without service bays or restaurants but including a convenience store.
D. INDIVIDUAL MARKET ANALYSIS
We are studying three distinct regions in the Province in our analysis of the competitive forces in the retail gasoline industry. Accordingly, we would request your company's response to the following questions:
1. In August of 1997, a price war occurred in the Lewisporte retail gasoline market.
a) What was your company's retail pump price for regular unleaded gasoline on July 15, 1997, for
(i) self serve; and
(ii) full serve.
b) Did your retail pump price for regular gasoline deviate from the July 15, 1997, benchmark, and, if so, please provide details of these deviations for the period July 15, 1997, through to September 5, 1997, as follows:
(i) date of the deviation;
(ii) amount of the deviation;
(iii) reason for the deviation.
c) Did your company provide any price support to any outlet operation in the Lewisporte area during this price war and, if so, what form of price support was provided?
2. The Town of Grand Falls has experienced a decline in both the number of retail outlets and the number of major oil companies operating these outlets. Please provide the following information concerning your operations in the Town of Grand Falls:
a) If your company no longer operates or supplies a retail outlet in, or immediately surrounding the Town of Grand Falls, please provide the following information:
(i) The reasons for your departure from the market.
(ii) Whether your departure is temporary or considered by your company to be a permanent departure from the market?
(iii) What conditions would need to be present in the Grand Falls market for your company to decide to re-enter that market?
iv) What role, if any, could consumers from the Town of Grand Falls, or the Government of the Province of Newfoundland play in encouraging your company to re-enter the Grand Falls market?
v) Upon leaving the Grand Falls market, was your company required to remove any underground storage tanks from any outlet? If so, what was the approximate cost to your company to comply with our Province's environmental laws in this regard?
b) If your company still operates or supplies an outlet in the Town of Grand Falls, but has closed, abandoned or otherwise stopped supplying product to one or more outlets, please provide the following information:
i) How many outlets have you stopped supplying since January 1, 1993?
ii) Why did you stop supplying the outlet(s)?
3. Generally, the lowest pump prices for gasoline are found in and around the City of St. John's.
a) What, in your company's view, are the principle reasons why the pump price for gasoline in the St. John's market is generally lower than in most other areas of the Province?
It is also noted that the pump price varies from region to region within the Province of Newfoundland.
b) Why is the pump price of self-serve regular unleaded gasoline generally higher in Deer Lake than in Corner Brook?
c) What efforts, if any, has your company made to its operations in the Province of Newfoundland to minimize the variances in pump prices between regions in the Province?
d) Please provide the selling price, expressed in cents per litre net of any discounts provided to the purchaser for the ex-tax pump price of regular unleaded self serve gasoline sold to:
i) the general public;
ii) key lock and card lock customers (if more than one choose the lowest price provided to any such customer); and
iii) bulk contract customers (if more than one choose the lowest price provided to any such bulk contract customer);
for the following locations:
i) City of St. John's/City of Mount Pearl
ii) Goobies Junction on T.C.H.
iii) Town of Marystown
iv) Town of Clarenville
v) Town of Gander
vi) Town of Grand Falls
vii) Town of Deer Lake/T.C.H. Junction
viii) City of Corner Brook
viv) Town of Stephenville
ix) Town of Port Aux Basques
x) Town of Lewisporte/T.C.H. Junction
xi) Town of St. Anthony
xii) Labrador City
xiii) Happy Valley-Goose Bay
for each of the following dates:
i) May 1, 1997
ii) August 1, 1997
iii) April 1, 1997
iv) March 1, 1997
v) January 1, 1997
vi) August 1, 1996
vii) January 1, 1996
viii) January 1, 1995
viv) January 1, 1994
FORM NO. 1
A. Location of outlet:
B. Current owner of outlet:
C. Number of years in distribution network:
D. If not currently operating, date of shut down:
E. a) Type of facility
- Self Serve
- Full Serve
- Both
b) Type of gasoline product
- Regular Unleaded
- Premium Unleaded
- Other
F. Ancillary Operations (check each applicable):
- Service Bay(s)
- Car Wash
- Convenience Store
- Restaurant
- Fast Food Outlet
G. Method of Operation:
- Company Operated
- Leased
- Cross Leased
- Independent
- Agency
- Other (describe)
H. Describe any major changes in either the type of facility, ancillary operations or method of operation that have occurred during the past four (4) years.
I. Volume of product sold (add volumes of all products sold at outlet) during each of the calendar years:
1993 -
1994 -
1995 -
1996 -
J. Describe the type(s) of pump(s) used at the outlet, the age of each and the date of last calibration?
K. Retail pump price for each product on the first working day of each quarter commencing on January 1, 1993:
January 1, 1993 July 1, 1995
April 1, 1993 September 1, 1995
July 1, 1993 January 1, 1996
September 1, 1993 April 1, 1996
January 1, 1994 July 1, 1996
April 1, 1994 September, 1996
July 1, 1994 January 1, 1997
September 1, 1994 April 1, 1997
January 1, 1995 July 1, 1997
April 1, 1995
L. Please described the chain of distribution for this outlet.