[Purrybonker]

Yeah, I've been known to hang around the inner sanctum of the odd oil company - but never banked enough to attain "baron" status.

The fuel distribution and retailing/marketing business is ridiculously stupid (for lack of a better word) from the perspective of evidencing sound business practises. That's basically why prices at the pumps bounce around so much.

As a handy example - those very few guys that actually refine gasoline are sooooo dumb that their "wholesale" sales people sell fuel in bulk quantities to "independents" at much lower prices than they sell to their own dealer network (because the wholesale market is very competitive). These same independents are then able to drop their street price below that of the refiner's own branded stations simply because their cost of supply is lower. Then the sales people that manage the service station side of those refiner's marketing businesses drop their price to compete with the independents. So those refiners frequently compete with themselves - wholesale marketers vs. retail marketers just down the hall from each other. Just one example of conditions that lead to "price-wars".

But the whole story is much more complex than that simple example. The vagarities of supply and demand and the timing and status of "swap" deals between fuel marketers are key components of price swings. Fuel is kind of a perishable product from a price-risk and storage limitation perspective. So that means that a particular oil company may have a particular need to move large quantities of certain types of fuel in certain markets from time-to-time. This also leads to temporary "price-wars".

Every oil company in Canada pinches itself once or twice per year to make sure that they really want to be in the retail fuel business. The only thing that keeps it attractive at all is the movement of gasoline buyers into the store to buy ancillary products. That's why all the oil companies are converting their sites to snazzy convenience store/bakery/coffee shop formats. Make $0.25 selling you a tank of gas - make $.75 selling you a coffee or a slurpee (frozen beverages are the highest margin item in a convenience store).

Trust me, when the price of gas "jumps up" - 99.99% of the time it's a movement back to the real market value (with a skinny margin) of the product. Just check the financial statements of any of those "major" oil & gas companies. Pretty scrawny profits in their retail fuel operations. Huge profits in upstream and midstream business with skyrocketing crude and natural gas prices. Buy shares now - sell them sometime soon.

No, really - trust me...