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Clement wants gas companies to explain themselves

Industry Minister plans to ask company officials to testify before a committee


 

Industry Minister Tony Clement wants the petroleum industry to explain to Canadians how gas prices are set. Clement said Thursday he plans to ask executives from refining, distribution and retailing companies to appear before a parliamentary committee once Ottawa reconvenes. “No one can understand why last year, when oil per barrel was around $140 or $150, we were paying $1.37 per litre, when this year oil is south of $98 a barrel and yet we’re paying more,” Clement says. NDP MP Jack Harris says the federal government should conduct some kind of investigation, led by a federal ombudsman, into whether oil companies are colluding together or if the industry is price gouging. On Tuesday, oil prices rose to 6.5 cents a litre throughout Ontario, in Montreal and in Vancouver, but fell 2.5 cents on Wednesday. A declining U.S. dollar, instability in the Middle East, market speculation, flooding along the Mississippi River, and Ontario’s consumption taxes on gas are all factors that have been identified in contributing to unpredictable price changes.

CBC News


 
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Clement wants gas companies to explain themselves

  1. Tony Clement and the Conservatives will not do anything except cut corporate tax rates so that the obscene profits being screwed from the Canadian people with these outrageous prices will end up in the oil company pockets.

    Canadian’s who voted for Harper are now going to find out why they should not have.

    • If you think the oil companies are screwing the public, why not simply buy their shares and get in on the action. Divert some of your cigarette and beer money.

      • Yeah, he can get a single share of BP for $444 right now. That’s probably what he spends on cigarettes and beer in a weekend. Exxon is trading at $81 so he could get almost 5 of those for that price. Thanks for the great advice, bizgrad!

        • Chad, you missed the point. This is not about investment advice, although there are energy related mutual funds who would be happy to accept a monthly deposit as low as $50.00 from any poor slob.

          I was merely trying to help @kirklandpete:disqus  confront his inner demons.  After all, he should not diss the oil companies until he has walked a mile in their shoes!

          • Yeah, a mutual fund is probably the way to go. My modest investments are in a growth fund and I sure hope they have some energy stocks in there! 

          • bizgrad are you working for an oil company? I look at the posts on this blog and see that many have fallen into the traps set by the oil industry. Taxes, razor thin margins, market prices, lower prices than europe etc etc. All are just bafflegab to confuse and deflect. Most oil companies are VERTICALLY INTEGRATED. They manipulate the market and play an accounting shell game to hide the profits from the public’s view until they release their annual results when they use more bafflegab to explain away their obscene bottom lines. The trillion dollar public bailout of the banks and auto industry should have been the eye opener for how big business has infiltrated government and set the agenda.

  2. The idea that the gas companies are gouging us is easy to agree with. It seems as the price of a barrel goes up, gas follows quickly; if the price of a barrel goes down, the price of gas goes down much more slowly (if at all).

    I say good for Tony, but make sure that we actually get the facts, and the price becomes fair.

  3. Well, the dumb people in Quebec and Atlantic Canada are importing oil from abroad at $115 per barrel rather than from Alberta at $100 per barrel.

    Quebec also imposed on a carbon tax on large industries which led to the shutdown of the Shell refinery in Montreal.

    Why do the Liberals and NDP complain the loudest about gasoline prices when they want to impose cap-n-trade will will increase them even more?

    • “Well, the dumb people in Quebec and Atlantic Canada are importing oil from abroad at $115 per barrel rather than from Alberta at $100 per barrel.”

      Can you show us where you get this info? World prices are world prices, as far as I know. And a fair bit of the oil going to east coast refineries comes from NL’s offshore wells – not exactly a “foreign” source.

      I really can’t see other regions paying a premium over the world markets. Are you saying Alberta is discounting their prices? Given the extra cost of oil sands extraction, if Alberta is selling their oil at a discount, then the dumb ones aren’t the ones on the east coast.

      • There is actually a glut of Alberta and Bakken oil right now overflowing Cushing, Oklahoma where WTI pricing is set. WTI is about $15 less than Brent (world prices). Quebec and points east pay world prices because Alberta oil is not allowed to flow east past the Quebec border.

        North American gasoline prices are currently being set off of world/Brent pricing since the US imports a lot of oil at world prices, not WTI.

        So refineries using WTI are making a killing right now. Refineries who use oil off of world or Brent pricing are getting killed.

        Oil and finished gasoline are traded daily and independently on commodity exchanges. Both have the most transparent pricing of any products in the world. Refineries have do not control the price of their inputs (oil), nor the price of their (outputs).

        • So you’re saying Alberta’s oil industry is short-selling, despite the higher price per barrel of production. And who is dumb?

          Well, I guess we all are; we just voted in a government who subsidizes the tar sands so they can sell to the US at below-world-market prices. Pure genius! 

          Re: “Alberta oil is not allowed to flow east past the Quebec border.” Why is this? Is it another one of Quebec’s bizarre rules, like not letting NL transmit power over their grid? It wouldn’t surprise me; in order to get oil flowing from offshore, NL had to agree the oil would be refined elsewhere because the Irvings and the Quebec refineries didn’t want competition. The Quebec pressure in particular led to the Feds saying the oil stays under the ocean if NL insisted on a new refinery to process it.

          Same deal when the mothballed Come-By-Chance refinery re-opened; NL is the only Canadian province where it can sell its products; the rest must be exported [oil refined there is imported because it refines sweet crude & Hibernia is sour crude] because Quebec put pressure on the Feds.

    • The people have no say in private industry not building a pipeline east from Alberta who is instead selling oil to the States. It’s a “Private” industry issue unless their is intent to collude with each other to inflate prices artificially.

    • Actually, people don’t get to choose where the oil that is used to produce the gas they buy comes from. What an idiotic comment. Oil is a globally traded commodity. Refiners purchase their oil from wherever they can get it the cheapest.

  4. Explain? This government wants someone to explain?

  5. We go through this same futile exercise pretty much every summer now. Nothing happens, nothing changes, nothing is found….but everyone feels better for having complained.

  6. So is this going to be a real inquiry or a whitewash to (a) rehabilitate Tony’s image and (b) polish up the image of those great friends of the CPC, the oil companies?

    When every gas station in a given region, regardless of brand, moves its pump prices in lock-step 99.9% of the time, how can it not be collusion? If it were truly a free market, we’d have price wars at least occasionally.

    • Actually, that is not an indicator of collusion, but the exact opposite. Go back to your first year economics course. In a “perfectly competitive” market buyers and sellers are price takers. Neither has flexibility to adjust the price. The margins at the gas stations are razor thin. If they cut the price by even a few cents, they’re losing money. On the other hand, if they raise the price even slightly above what the guy across the street is charging, sales plummet.

      • Unfortunately speculators in certain markets are rapidly becoming price makers and use insider information and links with governments to realise their self fulfilling predictions. See Glencoe and food price speculation as revealed in Al Jazeera.

        Links between these speculators and the oil companies are not unlikely and links between these two and politicians are more than likely. If Clement is really serious about exposing malfeasance at a corporate level he will have to expose the other links too and that will be a sight to see.

        This inquiry is window dressing only because to do otherwise will be opening Pandora’s box.

      • At the retail level, profits are thin – true. So the local owners can’t afford to go against the set price. But the coordinated raising and lowering of prices shows a controlling mind. And the oil companies themselves are doing just fine.

        I don’t normally go in for conspiracy theories, but this is one instance where the behaviour defies any other explanation. It couldn’t be more tightly controlled and uniform if it were government regulated. It smells to me rather like the price fixing several drug companies were nailed for a while back.

        • Patterns emerging from chaotic activity do not prove a controlling intelligence.

          • They may not take too kindly to being described as unintelligent! LOL!

            I get what you are saying, but this goes beyond simple, occasional patterns. No, the oil companies can’t control every aspect of the market, but with so few major players it wouldn’t be hard to control enough to prevent real competition.

            For an example, given the known bottleneck of the number of refineries in North America, why is it so hard to open more? A consortium were trying to open a new refinery in NL a few years ago; about tha time, the bottom fell out of the economy and no one would provide the necessary capital – but things have eased and to my knowledge the project is still on hold or abandoned. When Hibernia fiest came onstream, NL was point-blank told it could not build a refinery to process the oil; it had to go to existing east coast refineries. These are examples of deliberate squeezes to prevent competition. And that’s just two I know about…

      • And we have Economists, you know, running the country. 

        I dont usually agree with you, but, this, you understand. Basic economics this… Otherwise its populist political grandstanding to think the government can fix it.

  7. What a pointless bit of theatrics. Commodities prices are undergoing an inflationary boom due to central bank easy money policies. Until central banks crank up interest rates, commodities, and therefore gasoline, will continue to go up. Soon, this inflationary pressure will bleed into all other goods and services. In fact, it’s happening already.

    • But the crude price point is lower, and that is the benchmark for this commodity.  Why should the refined product price be higher this year when the benchmark commodity price is lower?  There was no change in tax rates, and no change in required product standards that would explain this.  The answer has to lie beyond the sale price of crude.  Maybe the refineries have incurred legitimate extra expenses in the course of a single year (all of the refineries, mind you), or the retailers have (again, all the retailers).  Or maybe some form of anticompetitive action is occurring at one of those two levels.

  8. As a conservative I welcome this enquiry, there is something terribly wrong when world oil prices go down and gas prices at the pump go up – not by bits but by big percentages. I see it as gouging, unless proved otherwise. What is most frustrating is trying to understand how the system works – it definitely is not your typical supply and demand scenario that one would learn in economics 101

    •  The prices of oil and of gasoline are independently set on open transparent commodity exchanges. The prices are determined entirely by free market forces.  

      Oil prices went down and gasoline prices went up recently because 15% of US refining capacity is threatened by potential flooding of the Mississippi river.  So oil as no place to be sent, and its price goes down.  And there is a threat that 15% of the production of gasoline will go away for a period of time, so its price goes up.

  9. Wonderful!

    Next up, maybe a committee of brains could look into why airlines & hotels charge more during times of peak demand like long weekends and holidays, or peak business-travel days.  The restaurant down the street charges less and throws in a free beverage at lunchtime, but then becomes a predatory pricer on evenings, especially Fridays and Saturdays.  Can we haul out a few fat-cat restaurant managers to mea-culpa themselves before this august body, too?

    Zellers offers a price rebate to seniors on Mondays.  The local bar has ladies’ night specials on Thursdays.  I want an explanation as to why they are willing to overcharge the other six days of the week!

    Come on people, what are we waiting for?  The government obviously hasn’t busybodied itself in the marketplace enough, yet!

    “What the market is willing to pay” is so dull and non-interventionist.  How dare we think we believe in a free market.

    • How many of those industries you mention are oligopolies controlling an economic necessity and with the ability to destroy entire economies? In how many of those industries do prices match exactly and change in lockstep within a given market? 

      • You left out “how many of those industries have special and regular taxes gobbling up a substantial portion of the retail price.”  

        The oil companies have zero interest in destroying by collusion our entire economy.  If Clement needs a dog-and-pony political theatre special commission to figure that out…

        • Oh, I don’t think they’d want to; I’m just saying they could.

          As to the taxes: though Canadians don’t want to hear it, our gas taxes are low compared to many countries’.

          Will Clement be able to prove anything? Does he even want to? Probably not, on both counts. I agree that, on the CPC’s part, that this is likely a dog & pony show. It makes it look like theCPC care – and helps distract people from the fact that Flaherty is already indicating the election promise to balance the budget early is a non-starter.

          If there is collusion (and I firmly believe there is), it will likely be better buried than the drug companies’ vitamin price fixing. Hearings where attendance is voluntary is nothing more than a play where the government pretends to be tough; the companies give pat answers; and Tony shrugs, says “oh well, then… sorry to have wasted your time; you’re obviously good guys after all” and everyone goes home with smiles on their faces for having pulled the wool over the public’s eyes yet again.

      • NEP! NEP! NEP! 

        • LOL! Is that a curse or a threat? 

          •  Yes!
            In the vein of “only Nixon could go to China”, only Tony and Steve can crush the evil oil capitalists.
            (yes, tongue firmly in cheek people, relax…would be something to see though!)

  10. Way off topic but Jon Stewart right now is airing a darkly hilarious piece about the absolute evil the Quebec/Canadian Asbestos industry commits. Why is this still legal? Canadians are smug complacent bastards. 

  11. One of the items in the photo is full of hot air, you choose. 

  12. I can’t really add anything here, since most of the savvy commenters have already pointed out that this is all easily chalked up to global trading and open market mechanisms and realities.

    What I will point out (and likely get booed at for) is that technically, if you remove inflation from the equation and track prices to income, gas is cheaper today per dollar earned than 20 years ago. This isn’t surprising either, since the efficiency of extraction and production has trended upward for years.

  13. BTW Macleans, thank you for putting the articles back at the top.

    Makes reference and quoting a heck of a lot easier and gives the comments a more prominent position.

    Cheers. 

  14.  If the Minister of Industry doesn’t know why gas prices go up and down he should ask his Deputy Minister.  If he doesn’t know, PM Harper should sit them down and tell them and then fire them both.

  15. This is all simply smoke and mirrors.  There is no way the gov’t is going to do anything to endanger their taxes from gasoline.  The ONLY thing that will smarten up the big oil co.’s is for us to quit buying the stuff.

    • You are on the right track but North America was designed to use gasoline. Most cities do not have adequate public transit and are spread out to utilize the vast spaces we inhabit, which necessitates use of the automobile. What we (the buying public) need to do is get our act together and choose ONE oil company to boycott until that company reduces prices to an acceptable level (10% less to start) in one shot, not by one cent at a time. The others will then have to follow. The difficulty is in communicating this strategy to the masses and coordinating the action. I choose Petro Canada. Why them? Because they are across the country and why not them? It could have been Esso or Shell or any national retailer, I do not care which we choose but we have to start somewhere TOGETHER, so Petrocan it is.

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