Montreal and Quebec City had the highest gasoline prices and retail margins in the province last year, even though it would seem the two markets should be able to benefit from large economies of scale, says a study by CAA Quebec.

"The two biggest markets in Quebec don't obey the law of supply and demand," said Cedric Essiminy, spokesman for the Quebec division of the Canadian Automobile Association.

"There's seems to be a glitch somewhere and we would like to know why is that glitch happening and what's behind that glitch," Essiminy said.

However, the Canadian Petroleum Products Institute disagreed with the study and said consumers are being treated fairly in a market that sees both high and low prices.

Carol Montreuil, vice-president of the petroleum institute's eastern division, called the study "intellectually dishonest."

He said provincial energy board statistics show that Quebec consumers paid the lowest margins to gas dealers in 2010 in the last four years. Montreal motorists have paid the about same margins for the last four years, he added.

But high gas prices do hit Montreal first, Montreuil said.

"There is no doubt that out of the major cities in Canada that Montreal has the highest tax structure in the country," Montreuil said.

"Higher prices out of all of the Canadian cities will always be in Montreal first."

Montreal's average price for regular gasoline was 108.3 cents a litre last year, compared with 98.8 cents a litre in 2009. In Quebec City, the average price was 106.6 cents per litre last year compared with 97.3 cents in 2009, the CAA Quebec study said.

The study found that the average retail margin was five cents a litre in Montreal last year, down slightly but remains "inexplicably high" compared to other provincial markets. The retail margin was 5.7 cents a litre in Quebec City.

Both cities had higher margins than in less populous regions where there can be less competition and higher operating costs, the study said.

Natural Resources Minister Nathalie Normandeau said Friday she would ask the province's energy board to take a look into the matter.

The CAA study noted that the highest observed pump price in Montreal in 2010 was 121.9 cents a litre last Dec. 23.

Petroleum analyst Roger McKnight said Ultramar Ltd. controls the entire Quebec market.

"They determine what the price is going to be," said McKnight of En-Pro International in Oshawa, Ont.

Montreal dealers paid 115.3 cents a litre earlier this week but were selling to consumers at 122.9 cents a litre, Essiminy said, questioning why the price of gasoline for consumers hadn't dropped.

CAA Quebec's study also found that the average retail margin in the isolated Saguenay-Lac-St-Jean region dropped to 4.6 cents a litre last year from 7.3 cents a litre in 2009, a decrease of 37 per cent.

Retail margins also went down in the less populated Mauricie and Eastern Township regions last year, compared with 2009, the study found.