moved that Bill C-452, An Act to amend the Competition Act (inquiry into industry sector), be read the second time and referred to a committee.
Mr. Speaker, the purpose of Bill C-452, which we will be debating today, is to give the Competition Bureau more powers.
In my speech, I will talk about oil companies, but the same applies to banks, whose interest rates are practically identical.
In 2008, those poor oil companies made mind-boggling profits. That year, Exxon Mobil raked in record-breaking profits for an American company: $45.2 billion.
The oil giant's net profits fell by over half in 2009 to $19.3 billion. So far in 2010, Exxon is making up lost ground. The company was hit by plummeting crude prices last year, but now recovering prices have netted the company a first-quarter profit of $6.3 billion.
They lost money because of the economic crisis triggered by commercial paper, but I think that they themselves played a part in the crisis. Allow me to explain.
The price of a barrel of oil rose steadily. In June 2007, it was $51 a barrel; in January 2008, $99; and in July 2008, $150. The price at the pump skyrocketed for all consumers and businesses. Companies raised their prices to compensate for the cost of fuel, and that pushed prices on consumer goods through the roof.
Bank losses combined with rising prices on consumer goods triggered an economic crisis. That is why the parliamentary committee needs to study the possibility of giving the Competition Bureau more powers.
The parliamentary committee will have to look at the price of crude oil, the refining margin, taxes and the retail margin.
The retail margin is the difference between the price retailers pay for gas and the price they sell it for. In Quebec, the retailer margin is not really a problem because it is usually between 3.5 and 6 cents per litre.
Even if some find that the taxes are too high, they do not vary much and certainly cannot account for the fluctuations in the price of gasoline. Most of these taxes are set and do not vary. Taxes are not the cause of increased gas prices; oil companies are.
To lower refining costs, oil companies have shut down a number of refineries and increased production capacity. The gap between supply and demand has narrowed, and so the slightest weather-related or technical problem leads to a price increase to maintain the balance between those two factors.
Long weekends and vacations are not unforeseen events. However, oil companies never seem to be able to prepare for them. They have nothing in reserve, and they tell us that the price increase is due to scarcity.
Can we imagine a small businessperson failing to keep any inventory in the lead-up to Christmas, and then claiming scarcity to raise prices? Yet the oil companies do it. Because they sell an essential product and there is little competition, they profit from our dependency.
The Bloc Québécois moved a motion, asking that the Standing Committee on Industry, Science and Technology pass it quickly and in full so that it would be in force by the summer since prices tend to increase during summer holidays. But the Liberals and Conservatives were opposed to it at that time.
This was the motion:
That, in the opinion of the House, the government should move an amendment to the Competition Act so that the Commissioner of Competition have the power to initiate investigations of the price of gas and the role of refining margins in the determination of the said price.
We can conclude that the inability of the refining industry to deal with the slightest unforeseen event is responsible for recent increases. Is that situation intentional or not? We do not know, because the Competition Bureau does not have the tools that would enable it to carry out a serious, complete investigation; and that is the reason for Bill C-452 today.
One thing is certain, however: the structure of the oil industry encourages sudden price increases, and that is why it must be monitored.
However, I should note that some increases in the refining margin are hard to explain. For example, the refining margin increased slightly in January and February 2009. Since this happened in the middle of winter during a global recession, the traditional short-term or even long-term factors do not seem to apply. Winter is typically when the refining margin is at its lowest.
Furthermore, the data clearly indicate that Canadian demand for gas decreased in late 2008 and the first half of 2009. We can surmise that use of refinery capacity was probably not a factor in the increase in refining margins in January and February.
Gasoline price crises may be the result of the lack of competition in the oil industry. The three largest refiner-marketers have 76% of the market share. The five largest account for 90% of the market.
The Competition Act must have teeth. Measures have been proposed to discipline the industry, and that includes strengthening the Competition Act. At present, the Competition Act has shortcomings. The Competition Bureau cannot conduct an investigation on its own initiative. It can only respond to complaints or a request from Industry Canada. The Competition Bureau is sorely lacking in powers when it conducts a general review of the industry: it cannot summon witnesses and offer them protection to encourage them to speak out. It cannot require the disclosure of documents.
Without these tools, it is virtually impossible to prove collusion or other anti-competitive practices. Even when competitors reach an agreement, the burden of proving collusion is on the bureau.
Near the end of its mandate, the Liberal government introduced Bill C-66, which was for the most part inspired by a comprehensive plan tabled one month earlier, but never adopted.
When the competition commissioner, Konrad von Finckenstein, appeared before the Standing Committee on Industry, Science and Technology on May 5, 2003, he identified shortcomings in the Competition Act:
...while the bureau's mandate includes the very important role of being investigator and advocate for competition, the current legislation does not provide the bureau with the authority to conduct an industry study....
It seems to me that it would be preferable to have a study on the overall situation carried out by an independent body that would have authority, that would be able to summon witnesses and gather information. It should also have the power to protect confidential information that someone is not necessarily going to want to share, but which would be vital in order to reach a conclusion based on the real facts.
I stated at the beginning of my speech that it is important for a parliamentary committee to examine the Canadian oil industry. The reason is simple. A similar study was conducted in the United States and the resulting report by the U.S. Senate dealt with whether or not refiners attempted to raise the price at the pumps.
So it is important for consumers in Canada and Quebec that the Committee on Industry, Science and Technology conduct the same study here in Ottawa,
An article in the May 25, 2002 issue of Les affaires refers to the report I mentioned. On page 16, François Normand said that from 1999 to 2001, refiners tried to drive up gas prices at the pump in the U.S. by deliberately reducing supply.
At least that was the main finding of the Permanent Subcommittee on Investigations of the U.S. Senate in a report entitled Gas Prices: How are They Really Set? The report was released in late April 2002 by the subcommittee chair, Democratic Senator Carl Levin from Michigan.
To reduce supply, refiners kept inventory very low. This also had an indirect impact on Quebec. Low inventory in the northeastern United States, one of the areas the report focused on, drives up market prices in New York, which refineries in Montreal use to set their rack price.
The Senate subcommittee looked at the practices of refiners in three areas of the U.S.: the west coast, especially California; the Midwest, particularly Michigan, Ohio and Illinois; and the east coast, particularly Maine and Washington D.C.
The subcommittee used statistics, such as wholesale and retail gas prices, which it got from the Energy Information Administration and the Oil Price Information Service.
Some refiners and pipeline operators also had to provide stacks of documents—103 boxes containing about 265,000 pages—on their refining and marketing activities from 1998 to 2001.
The subcommittee made some troubling findings. For example, an internal BP memo mentions a series of actions that could help keep prices high in the Midwest, including shipping gas to Canada and limiting gas coming into the area.
Testifying before the subcommittee, BP marketing vice-president Ross Pillari stated that the recommendations in the memo were inappropriate and that the company had not acted on them.
Let us talk about the decrease in the number of refineries. The American oil industry, which has been on the defensive since the report was released, acknowledges that inventory is low, but claims that there is no collusion—which would be a crime—between refiners to keep inventory low. According to the industry, there are two reasons for the low inventory: the decline in the number of refineries and the growing demand for petroleum products in the 1990s.
The subcommittee noted that mergers in the oil industry and the closing of many refineries over the past 20 years have increased the concentration in the refining industry. It also noted that during this period, the margin between supply and demand became tight. The subcommittee stated that higher retail prices, for example, in California, were the result of having a highly concentrated market.
The subcommittee did not discover any evidence of collusion among the oil companies to reduce supply in order to drive up prices. However, Senator Levin pointed out that the industry was so concentrated that collusion was not necessary to artificially impact supply. That is why it is important that the House of Commons examine this issue.
However, we have other options available to us, such as creating a petroleum monitoring agency. In its November 2003 report on the price of gas, the Standing Committee on Industry, Science and Technology proposed the creation of a petroleum monitoring agency.
It is quite incredible that, while the oil industry supported this initiative, the Conservatives were against it. The Conservatives are even more inflexible than the oil companies when it comes to defending the interests of the oil companies. They really do not need lobbyists, when they have the Conservative government.
To make it look as if it was doing something, the government set up an Internet site that gave the price of gasoline in major cities. It was just an Internet site. It did not conduct any studies on the oil industry and was unable to recommend any course of action. In other words, it achieved nothing. It takes a real office to monitor this industry.
We have to redistribute resources in order to stop the oil industry from making our society poor. We have to impose a $500 million surcharge on the oil companies' profits. We have to repeal the accelerated capital cost allowance for investments in the oil sands, when the price of crude exceeds a threshold of somewhere between $40 and $50. The government announced this measure in its last budget, but it will not come into effect for another three years. We have to make the oil companies pay for the environmental damage they cause by establishing emissions caps, together with a carbon tax and a permit trading system.
On December 9, 2009, I invited some officials from the Competition Bureau to my Ottawa office to explain to them that Bill C-452 would give them more investigative powers but, to my surprise, they told me that they did not want more powers.
This is why I think it essential that this bill be carefully examined in parliamentary committee, and I hope my colleagues will allow that to happen.