Gas boycotts are not the answer

Resident says gas boycott won't do anything to lower gas prices in Revelstoke.

Editor,

Re: Let’s fix our brightest tourist signs, Letters, Oct. 9

I agree that our high gasoline prices are having a negative effect on our city. I notice it mentioned regularly on Twitter and I hear it in conversations but the age-old solution of a boycott has never worked and never will.

You have to look at the current cause of the issue – Costco in Kamloops. Costco’s goal is to offer gasoline for one cent less than its competitors. The major oil companies, fearing volume erosion, match whatever price they put out. The price keeps going down, well below cost, until Costco resets the price higher and the whole process starts again. Generally, the further you get from Costco, the higher the price (Golden 1.419). The oil companies need to make up for the loss of margin somewhere so the outlying communities pay more. Kamloops wins, Golden loses. Let’s remember that the Costco effect extends to more than just fuel; I pay 78 per cent more for my medications here in Revelstoke. Gas is only 12 per cent higher.

Now to the solution. People are not going to drive less, so boycotts just move the volume around. We have four choices:

1. Encourage Costco or Walmart to set up in Revelstoke with a gas offering (political suicide).

2. Set up large storage tanks and buy in volume and avoid the retail margins like the city did (impractical for consumers).

3. Ask the oil companies to take their signs down. (The price signs actually get special treatment in the sign bylaw.)

4. Support the only independent gas retailer left in Revelstoke.

Most independents get forced out by predatory pricing practices of their larger competitors. The store in the Big Eddy has survived on low margins (losses if you include credit card charges) for many years by keeping overhead low and diversification of his offering. I operated that store for one year and even though its volume is a fraction of the volume sold in the rest of the city it can be the price leader for the entire city. (In the spirit of full disclosure, I supply wholesale gasoline to the mentioned store). The owner works the front counter and receives feedback from every customer that passes through the door but why should he have to carry the entire weight of the tourist industry on his shoulders? The fuel industry is highly competitive so why shouldn’t he be able to maximize his profit like every other business? No one is calling for the boycott of any other business in Revelstoke.

The most efficient economic outcome would be to have the independent sell gas at cost and then be compensated for his loss of profit.  (again political suicide). The other option is the opposite to common boycott approach. Overwhelm the independent retailer with your business. Make a pledge to him: “Here is my business. I will support you with my purchases in good times and in bad if you support me with lower pricing.” The retailer is better off because he sells more in store items and his fuel profits stay the same because he sells more volume but at a lower margin. The key is to continue to support him even after the big oil companies drop their pricing to match his.

We need to support and encourage all local business, not organize boycotts.

Peter Humphreys,

Revelstoke

 

 

 

 

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