In Wednesday’s column, I wrote about the 30 per cent spike in gasoline prices over the past year, and how price-relief in the order of a 13 per cent to 18 per cent drop in prices is only weeks if not days away. Alas, I didn’t have space to make some useful points.

The oil industry doesn’t like high gasoline prices any more than you do. High pump prices are bad for business. There are two obvious reasons for this.

When gas prices soar, motorists buy less gas. High gas prices make a big, readily noticeable dent in disposable income. Many customers retreat to public transit and carpooling. And most cut back on use of their vehicles. Demand plummets and the cash registers go silent.

On Monday, after the media warned of a looming gas-price hike, there were lineups around the block at stations in the GTA.

But on Tuesday, as news reporters covering the price spike visited the same pumps, they saw filling stations bereft of customers, or just one lonely motorist filling the tank. A store empty of customers does not make a profitable business.

Second, profit margins for gas-station operators and the refiners that supply them shrink as the retail price rises. If the refiner is suffering a periodic spike in crude prices, it must pass that extra cost on to the gas stations it supplies or go broke. In order not to scare business away, filling stations pare their own profit margin or operate at a loss to keep the selling price as low as possible.

That’s how it works in banking, an industry that hates high interest rates. Higher rates drive away prospective borrowers. And they reduce the “spread,” or gross profit margin, between the suddenly higher interest the bank has to pay on my guaranteed investment certificate and what it’s able to charge borrowers without depressing demand.

When a retailer’s cost of inventory and its operating expenses are low, it can charge you more for it. That’s the Wal-Mart story in a nutshell.

It’s not a conspiracy.

Dan McTeague, the most vocal of oil company critics in this latest price run-up, told the CBC that “This is simple profit-taking in the market, particularly one run now by unregulated commodity speculators.”

As I mentioned in my Wednesday column, CME Group, the world’s biggest commodity exchange, imposed a whopping 22 per cent increase on Monday in the collateral margin that traders must post when they deal in gasoline futures. The trading price of gasoline futures started dropping immediately. In any event, price impact of speculation, while ever-present, works as often to depress prices as to inflate them.

A conspiracy assumes there are no antitrust regulators or headline-seeking politicians. It also assumes that Esso and its parent Exxon would be charging the same nosebleed prices everywhere. Instead, they’re charging $1.40 per litre in the GTA and Montreal, but just $1.29 in Ottawa, $1.31 in Saskatoon and $1.04 in Buffalo.

Big cities are hit hardest when gas prices soar. I mentioned the Monday lineups for gas before the price jumped. That’s a big-city phenomenon and depletes refineries and filling stations, reducing supply and contributing to the price spike.

Check out GasBuddy.com, GasPrices.Mapquest.com or the other services that monitor where gasoline prices are highest and lowest. You’ll notice that prices in medium- and small-size cities, in Ontario and across North America, remain comparatively low. The pump price in London, Ont., is about a cent less on average than the price in Toronto.

At the Loaf N Jug in Casper, Wyo., the pump price is 89 cents a litre. “People drive through here from Colorado and Montana, and they’re always saying, ‘Holy moly! You guys are way less expensive,” station operator Amanda Marshall told the Los Angeles Times.

Well, yes. The Loaf N Jug has about six fill-ups a day and has ample supply.

On Monday, my Petro-Canada station at Keele St. and Bloor St. W. was doing about 40 fill-ups an hour. It’s also a 24-hour operation.

Loading... Loading... Loading... Loading... Loading... Loading...

Amanda Marshall heads home before the sun sets.

dolive@thestar.ca