Observing much controversy about appropriate gasoline pricing strategies of the Federated Co-operatives Ltd. (FCL), I’ve determined that they do not have much control over pricing. By brainstorming pricing strategies I have concluded the price of gasoline is partially regulated by major oil companies such as Shell; Esso; and PetroCanada, because the Consumers” Co-operative Refinery (CCRL) does not own any wells of its own. The other regulator, a key price setter, is the Saskatchewan’s Crown Investment Corporation, which owns 50% of the NewGrade heavy oil upgrader. This essay will outline roles of each of these entities and how they must play their parts for pricing gasoline in Saskatchewan.
The pricing strategy that the FCL has set is probably about the best they can have, and in the long run will serve their members” interests better. They do this by keeping the price at the pumps the same as competitors. This is important to do because of the chain reaction it would set off if they did not. By undercutting the competitor’s prices (Shell, Esso, etc.), the major oil companies would not be pleased and begin cutting off the CCRL’s supply of crude oil. Also in the short run this would have a direct negative impact on the amount per litre the FCL makes marketing the fuel, affecting their ability to carry out their administrative duties. This could mean the FCL would have to look at the grocery industry for revenue, and essentially raising prices at the grocery stores. This would make members worse off at the pumps and at the grocery stores.
In the gasoline hierarchy the FCL only receives 5% of the price charged at the pumps for fuel, the CCRL gets 17.8%, crude oil costs are 36.5%, and the government taxes total 40.7%. The provincial levy is 20.5% and the federal levy is 13.7%. These numbers tell us the FCL does not have any room or say on its pricing strategy. The federal government plays the key role here in pricing gasoline, not only because of the levy it implies but also the fact that the Saskatchewan Crown Investment Corporation owns 50% of the NewGrade heavy oil upgrader.