Excuses, excuses.

The latest excuse I’ve heard for increases in retail gasoline prices is that gas prices follow the daily wholesale price. Today gas prices declined:

October unleaded gas ended at $2.138 a gallon, down 5% Friday and for the month.

So why did service stations in Ontario, Canada, raise their prices to $1.15 per liter ($4.60 per gallon), an increase of 40 cents per gallon?

And just a day after the Canadian Centre for Policy Alternatives released a report indicating that gouging was occuring already before the increase:

The study, released by the Canadian Centre for Policy Alternatives (CCPA) on Thursday, concluded soaring gas prices have more to do with oil companies playing on consumer fears of a gas shortage than any real market forces.

The Canadian Petroleum Products Institute’s Ontario division called the study “severely flawed”:

“First of all, it ignores a foundational principle that Canada’s energy policy is based on a notion that says commodity prices are set by the international market. Canada is a price taker. So whether it’s crude oil or gasoline, we don’t make markets,” she told CTV’s Canada AM.

When Katrina struck the Gulf Coast, about 10 per cent of the U.S. refining capacity was wiped out, she said.

“So you have a tremendous supply shock…The price on the international market, the wholesale price ratchets up.”

But as I noted above, the wholesale price went down. Ah but that’s for gasoline futures you say. Then shouldn’t the price increases also have taken their time?

What am I missing?