My Yorkton and Ottawa offices continue to receive letters from constituents complaining about high gas prices, and I share your frustration.

Many people believe that the federal government has the right to rein in high prices that don’t always come down in lockstep with crude oil prices in the marketplace. The government doesn’t have a say in gas pricing, just as it cannot impose lower prices for bread, lawnmowers or shoes. Gasoline prices reflect complex market conditions that are affected by a variety of economic circumstances.

As noted by Natural Resources Canada, the price you pay for gasoline at your local service station can vary quite a bit from the price in other provinces and even the next city. Price differences between cities and across Canada involve four key factors: taxes, competition and consumer choice, the amount sold, and the type and location of stations. Federal government excise taxes are limited to 10 cents a litre for gasoline, four cents for diesel, plus the five percent GST everywhere in Canada.

The February 2009 issue of Natural Resources Canada’s publication, Fuel Focus, points out that the commodity price of gasoline will change regardless of crude oil price fluctuations. Gasoline prices at the wholesale level tend to respond to many factors independent from crude oil prices. The pump price may reflect increased demand, seasonal demand, inventory levels, or reduced production caused by maintenance or repairs at refineries. Serious weather events also have the potential to partially or completely shut down refineries and cause a gasoline shortage and higher prices. Canadian refineries generally operate at full capacity, so even a small disruption in supply can lead to higher prices regardless of what is happening in crude oil markets.

Fuel Focus also notes that the volatility in gasoline prices is affected by where you live. The frequent changes to the price of crude oil that we have seen in the past only makes this volatility in the retail and wholesale gasoline markets more pronounced. Large urban outlets have an advantage as higher sales volumes can offset a lower cost per unit sold. Smaller outlets, on the other hand, need a higher margin to cover their retailing costs.

In 2008, the average mark-up made by retailers in a sample of five Canadian cities was six cents per litre. To stay competitive, we have seen many add other services such as convenience stores or car washes to generate additional income and enable them to sell gasoline at lower prices.

The perception of high gas prices is a big pill for everyone, but Saskatchewan is subject to the same market forces and free enterprise that affect all other provinces and territories in Canada.

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The audio version of Garry's April 27, 2009 op-ed column can be heard by clicking here