INST Committee Report
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In February 2003, the Standing Committee on Industry Science and Technology agreed to summon representatives of the oil and gas companies and other experts so that it could explore the possible causes of the increase in the price of gasoline and the significant negative effects the increase was having on the economy, in order to recommend appropriate corrective measures to the federal government.1
While the body of the report does a good job in presenting reasons as to why gasoline prices fluctuated in early 2003, the Canadian Alliance members of the standing committee do not agree with the main recommendation of the report.
1. No collusion
The Canadian Alliance members of the committee listened to witnesses from all sides. The evidence was clear — collusion was not the cause of the increase in the price of gasoline in early 2003.
Despite investigating this issue 19 times, the Competition Commissioner stated:
…we have never found any evidence of any kind of collusion except at a very
local level, usually a bunch of stations getting together and trying to maintain the price at a certain level. Those we have prosecuted with some success. [Konrad von Finckenstein, Commissioner of Competition, Competition Bureau, Industry Canada, 40: 15:50]
Even those who testified they believe collusion is possible in gas pricing offered no concrete evidence. The Quebec consumer coalition was unable to offer any proof except their belief there was a “ …strong possibility of a price-fixing arrangement.” [Claude Girard, President, Coalition pour la défense des consommateurs de carburant du Saguenay-Lac-St-Jean, 43 : 15:45]
2. Accuracy of MJ Ervin data
It has been suggested that the government again begin to collect data concerning gas pricing in Canada. The data collection role is being successfully filed by the private sector through MJ Ervin & Associates.
I have no reason to believe that the information provided by MJ Ervin & Associates is not accurate or as reliable as what Natural Resources Canada used to collect. The only thing that matters to us is that the data are accurate and are collected in an objective way. Nothing indicates that MJ Ervin & Associates information is inaccurate or biased. [Konrad von Finckenstein, Commissioner of Competition, Competition Bureau, Industry Canada, 40: 16:00]
As Michael Ervin, President of MJ Ervin & Associates, pointed out in his opening statement, the oil and gas sector is one of his clients. If the government moved back into the data collection field, it could be seen as subsidizing the oil and gas industry — the main clients for such data.
The Canadian Alliance does not believe there was any evidence to support the government re-engaging in data collection when the private sector, through MJ Ervin & Associates, is successfully fulfilling that role.
3. The Oil and Gas Industry should provide more information
The Canadian Alliance recognizes that there is a problem of perception in Canada — consumers believe there is price fixing, no matter how many investigations are conducted. Both oil executives and the Competition Commissioner noted that, time and again, they hear accusations of collusion without proof. “This is an industry that has the highest price visibility you can imagine.” [Konrad von Finckenstein, Commissioner of Competition, Competition Bureau, Industry Canada, 40: 15:50]
Nevertheless, we believe the industry could do more to explain price setting and price fluctuations. This is a complicated matter, and we believe the oil and gas industry is in the best position to reach out to consumers.
The Canadian Alliance recommends that the Minister of Industry write to the oil and gas industry in Canada to encourage them to immediately appoint a Petroleum Information Commissioner to provide information to Canadians and help address consumer concerns.
4. The Competition Commissioner’s ability to investigate specific allegations.
Some have suggested the Competition Bureau does not investigate the issue of collusion and price fixing with enough rigour. The Canadian Alliance believes this is simply not the case.
Since 1972, there have been 13 trials concerning retail price maintenance cases related to gasoline or heating oil prices resulting from inquiries initiated by the bureau. Eight of these resulted in convictions. These cases, however, are concerned with local market and isolated incidents. This clearly shows that the Competition Bureau has always been prepared to investigate complaints and take enforcement action under the criminal provisions with respect to the petroleum industry whenever evidence has been presented to us …The Bureau has blocked potential transactions which could substantially lessen or prevent competition; it has required parties to divest significant assets such as refineries, terminal and service stations; and it has required refiners to supply products to independent retailers. I would also reiterate that should the Competition Bureau obtain any evidence of conduct contrary to the evidence to the Competition Act, we will not hesitate to take the appropriate measures.” [Konrad von Finckenstein, Commissioner of Competition, Competition Bureau, Industry Canada, 40: 15:30-35]
However, it has become clear that the volume of complaints the Bureau entertains and investigates on the issue of gas prices has become a burden.
“The provisions of the Competition Act give us the mandate we need to do our work. If you are talking about our budget, our resources, no, I do not have the resources that I need to carry out the investigations that I would like to do. [Konrad von Finckenstein, Commissioner of Competition, Competition Bureau, Industry Canada, 40: 15:55]
The Canadian Alliance continues to support the recommendation of the Standing Committee’s report entitled: “A Plan to Modernize Canada’s Competition Regime”. The committee recommended, “ …the Government of Canada provide the Competition Bureau with the resources necessary to ensure the effective enforcement of the Competition Act.”2 This recommendation should become a priority for the Minister of Industry.
5. Taxes
As the main text of the report points out, over the long term, the price of gasoline excluding taxes increased 50%, while taxes increased 67%. Taxes, therefore, are the fastest growing component of the final price of gasoline.
The tax burden at the pump has been raised as one of the reasons why prices are higher in Canada than in the United States. “Once you strip out the taxes and do the exchange rate, the price of gasoline is very similar around the world.” [Mr. Richard Taylor, Acting Deputy Commissioner of Competition, Competition Bureau, Criminal Matters Branch, Industry Canada, 40:15:45]
A month ago — October 7th, 2003 — Liberal members of the House of Commons agreed to start sharing the federal gasoline tax dollars with Canada’s cities. Little has been done since that time to make that promise a reality.
The Canadian Alliance believes government has a role to play in funding Canada’s infrastructure. At the same time, we believe that responsibility for infrastructure lies primarily with provinces and municipalities. We will therefore reduce federal gasoline taxes conditional on an agreement with the provinces that they will use this tax room to fund infrastructure in provincial and municipal jurisdictions. We will also continue and expand upon investments in border infrastructure and other areas of primary federal responsibility.
| 1 | The motion was debated by SCOIST on February 17th, 2003. |
| 2 | Recommendation 5, April 2002. |