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Choosing the right gas station for you

19 June 2010

Everyone knows that gasoline is a commodity:

  • Gasoline is traded as a commodity on the New York Merchant Exchange
  • Gasoline is derived from crude oil, another commodity
  • Gasoline is chemically similar across stations (aside from additives)

Even though gasoline is a commodity, it has the loyalty of a branded product. How did this happen? Oil companies have created loyalty programs to convince you to pull into their gas station instead of their competitors. Worse of all, some people may even drive an extra distance just to fill up their gasoline tank at their favourite retailer.

When I started driving in 2008, I wanted to know which gas station rewards offered the best value. In the past I made the mistake of blindly collecting Air Miles, without knowing that an Air Mile is only worth a lousy 11 cents. I wasn’t going to let this happen anymore for any more reward programs. I asked myself, “Which gas station has the best rewards program in Canada?”

Secret Points, what are you made of?

As I mentioned in my analysis of Credit Card Rewards programs new window icon, marketing will always skew your decision making skills for their own benefit first. This is why it is not easy to understand most rewards program at face value. Each rewards program can inflate or deflate the points per dollar spent and the points per reward dollars. Consider the following:


Retail Station Earning Points Redeeming Points Redemption Rate
Small Esso logo 1 Esso Extra point for every $1 3500 Esso Extra points per $20 in gas 0.56%
small Shell logo
1 Air Mile for the first $20

175 Air Miles per $20 in gas

0.57%

Which has the better value for the consumer? For every dollar you spend, you’ll get more points at Esso, but you need fewer points to redeem a $20 gas certificate with Air Miles. When you do the math, both programs work out to roughly the same value (assuming you only spend $20 per fill up).

The Analysis

Here is a breakdown of the reward options at Canada’s largest gasoline stations. Disclaimer: I compared the redemptions value for gas cards and free car washes. You can use your points to get soft drinks and lottery tickets at a higher redemption value, but I believe you should use points for things you need, not things you desire.

The redemption values in the table are for an average fill up between $20 and $60.


Gas Station Rewards Program Redemption Rate Comments
Esso logo

Esso Extra new window iconEsso Extra card

0.56% 1 Esso Extra points per $1

Aeroplan new window iconAeroplan card

0.25% *

1 Aeroplan points per $3

Petro-Canada logo

Petro-Points new window iconPetro-Points card

0.24% 5 Petro-Points per 1 L
Shell logo

Air Miles new window iconAir Miles card

0.37% *

1 Air Mile for the first $20

Chevron logo

More Rewards new window iconSave on More Rewards card

0.17% 1 More Rewards point per $1
*The reported redemption value has been calculated for an average fill up between $20 and $60.

Analysis for Canadian gas station rewards

Analysis for Canadian gas station rewards

Esso logo

Esso Extra is by far the best rewards program. When you purchase gas cards you have a redemption value of 0.56%, and 1.5% for car washes. Car washes have a lower cost than free gasoline to the gasoline retailer, which is why gas stations make it more attractive for you to use your points for car washes.

Sometimes you may find a promotion where you get double the Aeroplan miles at Esso stations. The average redemption rate for Aeroplan is 0.25%, so even doubling the points rewarded is still less than what you’d get with Esso Extra.

Shell logo

I rarely go to Shell gas stations. They are not common in the Milton area, and their stations are usually outdated. The only time I ever go to Shell is when I want to redeem my Air Miles for $20 gas certificates.

One promotion that does convince me to pull up to a Shell station is when they offer 5 times the Air Miles when you purchase at least $30 in gasoline. At that rate, you are getting back at least 1.15% – double what you’d get at Esso, and quadruple what you’d get at Petro-Canada.

Petro-Canada logo

When I was driving in Fall 2008, I remember Petro-Canada’s reward program being a little more enticing than 0.25%. It was probably just as good as Esso’s program. What happened? Petro-Canada “merged” with Suncor in July 2009. Petro-Canada has a large presence in the downstream industry, but Suncor is a heavyweight in the oil sands. If I were to make an educated guess, Suncor slashed the redemption value of the reward programs so they can siphon more cash into oil sands capital expenditures. Based on the current economics of the gasoline supply chain, there is more money in extracting crude than selling gasoline. The interesting thing about Petro-Points is that they are awarded on a volume basis, not a dollar basis. When the price of gasoline rises, the redemption value of your Petro-Points falls down. You may earn 0.24% now, but in 2 years that may drop to 0.20% as crude and gasoline rise.

Chevron Canada logo

Most Canadians are probably not familiar with Chevron. Chevron has a refinery in BC, which is probably why they are only present in “the best place on Earth”. Chevron loyalty program is “Save on More Rewards”, as they do not have their own. All I have to say is that they don’t have much to offer with 0.17%.

Topping to the full dollar

One mistake I did in the past was rounding up my gasoline bill to the nearest dollar. Why? Probably because everyone likes to see even numbers and you qualify for that extra point. As I had learnt with Air Miles, you should never blindly give away your money for more points.

Let’s say you fill up your tank to the top and the total is $29.90. You are currently eligible for 29 Esso Extra points. But do you continue to over pump to $30, just so you can get the extra Esso Extra? Would your answer change if you knew a single Esso Extra point is worth $0.0056? In this example you’d be spending $0.10 of your own money to get $0.0056 in rewards. That isn’t really a good deal on the consumer end.

Note: gasoline is very volatile, meaning it will evaporate if you leave it open to the atmosphere. This is why it is possible to over pump your tank without any gasoline spilling out of your tank.

Gas Buddy vs Tomorrow’s Gas Price Today

Gas Buddy new window icon is a website that lets drivers share the gas prices of various stations across Canada. Some people may be inclined to fill up their car at a station that has the absolute lowest gas price in the area, without knowing the cost to drive there is more than the savings at the pump. Here’s an example of why you should not get tempted to drive the extra distance to save on a gasoline price:


Ford Aspire
Tank Size 40 L
Fuel Economy 9 L / 100 km or 26 mpg
Gas Station Petro-Canada logo Esso logo
Price of Gasoline 112.8 cents / L 111.8 cents / L
Distance from Home 1 km 5.1 km
Travel Cost $0.20 $1.03
Fuel Cost $45.12 $44.72
Rewards Value $0.11 $0.25
Total $45.21 $45.50

Even though Esso has a cheaper gasoline price and a better rewards program, it is still worth it to go to the closer Petro-Canada station.

The better approach is to use Tomorrow’s Gas Price Today new window icon to gauge when you should fill your car up. When the financial markets close on weekdays, you can predict the next day’s posted gasoline price in the GTA, and other communities in Canada. You just have to know what numbers to find, and how to use them. Luckily someone at TGPT does this for you and updates it during the week. At the end of the work day I check to see if there will be a change in gas prices. I fill up my car when tomorrow’s prices are going up and my tank is almost empty. On the other hand, I wait to fill my tank if gas prices are going down.
You’ll save far more money by using Tomorrow’s Gas Price Today than a website like Gas Buddy.

The Price of Loyalty

When I was working at Petro-Canada during my last work term I had a little secret I didn’t want them to know. I continued to fill up my car at Esso stations. During one of the monthly co-op presentations a marketing director shared his story about Petro-Canada’s Glide car wash. The guest speaker asked which gas station people used to wash their cars. I was honest and said that I chose Esso over Petro-Canada as it was closer to my home. Should I have shown loyalty to my co-op employer? Should I have bought Petro-Canada’s gasoline, and used their magical Glide car wash? No. Gasoline is a commodity, not a branded product. Let me explain why there is a price to loyalty.

Milton gas stations

My home in Milton was roughly located between an Esso and a Petro-Canada gas station. During my commute home I would take the shortest route as highlighted in the blue. I had the choice of going to Esso which was on my way home, or travelling an extra 1.1 km to show my loyalty to Petro-Canada.
We already know that Esso offers a better rewards program for drivers, but the story doesn’t end there. Driving the extra distance has a cost – an unknown cost to most drivers. For a small car like a Ford Aspire, this is what the math looks like:


Ford Aspire
Tank Size 40 L
Fuel Economy 9 L / 100 km or 26 mpg
Price of Gasoline 100 cents per Litre
Gas Station Esso logo Petro-Canada logo
Extra Distance 0 1.1 km
Travel Cost $0 $0.18
Fuel Cost $40 $40
Rewards Value $0.22 $0.10
Total $39.78 $40.07

If I were to show my loyalty to Petro-Canada, it would cost me 30 cents per fill up. I doubt most businesses would justify that cost.

Conclusion

At the end of the day, nobody should go out of their way to fill their car at their favourite gas station. It is easy to get caught up with collecting points, and I know I have been guilty of this in the past. Overall, there are three things you should keep in mind when filling up:

  • Esso offers the best rewards program, followed by Shell if you spend at least $20
  • Never over pump your gas tank to get the extra point
  • Never go out of your way for your favourite gas station (including Esso stations)

If there is one expression that sums what I have talked about, it would probably be: a penny saved is a penny earned. Better yet, a litre saved is a litre gained.

Comments

comments


2 Comments »

  • Patrick said:

    I have a bit of an issue with your “•Never over pump your gas tank to get the extra point” advice.

    In your own example, you reason that 0.56 cents is not worth 10 cents of your own money. But with the goal being the most points for the least amount of money, it actually is more beneficial to get the extra point on several levels.

    1- You reduce your dollars per point cost as in your example you WOULD be paying $1.03/point without that extra bit of gas, but adding in more results in an even $1.00/point cost.

    2- Factor in the cost of going to a gas station in the first place and it stands to reason that the most amount of fuel in your tank possible results in less trips to a gas station (though this is arguably negligible when we’re talking about a dime of gas) which saves fuel (AND wear and tear from stopping and starting the engine, possible fuel dripping onto the paint which would accelerate rusting, general increased risk of death by explosion, etc.)

    3- Even though modern cars have a gas vapour collection system which makes this another negligible claim, the more gas you have in your tank, the less headspace you have, resulting in lower rates of evaporation and lower rates of fuel loss.

    Great post. Sorry I’m so obnoxious 😛

  • kcorreia (author) said:

    Yes, very obnoxious! The funny thing is you are probably the only person I could have a debate about gasoline reward programs.

    The reason why I say it isn’t worth the extra point is because gasoline is so volatile that you could probably “pump” a lot of gasoline into the atmosphere instead of your car tank. So you get the 1 extra point, but you don’t get the gasoline in your tank (despite a better points/dollar spent ratio)!

    And if you look at the Aeroplan data for the fuel card you’ll see that the graph approaches a final value (asymptote?). Basically getting the extra point matters when you are only filling less than $10. Once you get to $40 in gas the extra point isn’t as significant.