Industry Committee on June 11th, 2007

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

Do we have any companies in Canada that aren't part of those four majors?

[Howard Brown]

Sure. Most of them are not—EnCana, for example.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

Irving.

[Howard Brown]

Yes. On the downstream part of it, Irving is an independent.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

And is Petro-Canada pretty much offered only to shareholders?

[Howard Brown]

Is there a dominant minority shareholder in Petro-Canada? I think it's very widely held.

[Philip Jennings]

I don't think so.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

I beg your pardon?

[Howard Brown]

I think it's very widely held, so there'd be a lot of individual shareholders or institutions holding the shares in Petro-Canada. Shares in Syncrude, on the other hand, are held predominantly by major oil companies.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

Well, the question begs an answer. Is there possibly more to the price of oil than just what we investigate here in Canada? With slight variations, it seems to be consistent right across the board, no matter what country you go to.

[Howard Brown]

It is a global market, and once the stuff is out of the ground, it will go to the place where the margin is highest—ships are rerouted on the high seas and sent to destinations—as is refined product.

The question of whether either national governments or OPEC in particular is able to influence the price of crude is both fascinating and very complicated. There's almost certainly no question that they are able to, in the short run, and I think some of the run-up that we've seen in crude prices is maybe a result of market manipulation. The evidence, if you go back to the 1970s, demonstrates that you can exert market power for a relatively short period of time. It's very difficult to exert market power over periods of a decade.

The only reason I would personally wonder if the future is going to be different from the past is that reserves today are so highly concentrated in a small number of companies, where access is either limited only to state oil companies or is very closely controlled by the government. You have a lot of oil in places like Saudi Arabia, Venezuela, and so on, and that does give you pause to wonder if maybe this episode will be a little bit different from the 1970s.

[The Chair, Conservative, James Rajotte]

Thank you.

Thank you, Mr. Van Kesteren.

We'll go to Mr. Masse.

[Brian Masse, NDP, Windsor West, ON]

Thank you, Mr. Chair.

Thanks to the panel for being here.

Ms. Potvin, in your comments in your presentation you said, “In fact, to the extent that high pump prices cause motorists to drive less and reduce their consumption of motor fuels, federal excise tax revenues could actually decline.”

I take that in reference with regard to what was recently just released from Statistics Canada, which is their Study: Year end review of the economy of April 12, 2007. They have a section called “Consumers were unfazed by rising gas prices”, and this is what they say:

Consumers in Canada mostly shrugged off the effect of rising gasoline prices on their driving habits, never mind their overall behaviour.

Retail gasoline consumption has continued to increase every year since 2002, including a 0.8% rise last year. The only concession drivers made to higher prices was to switch from premium to regular grade gasoline in each year.

Neither did rising gasoline prices broadly affect the level or composition of vehicle sales. Overall, unit sales were the second highest ever, just 4% below the record set in 2002.

For the fifth straight year, purchases of trucks rose faster than car sales. In fact, the strength of truck sales pushed the share of cars in all vehicle sales to a record low of 51.7% last year.

How can you argue that you're not going to see an increase in revenue, when even Statistics Canada has reviewed this since 2002?

[Lise Potvin]

In fact, what I said is that the revenues we get are unrelated to the prices and are just related to consumption, and that to the extent.... I didn't say there would be reduced consumption; I don't know that. But to the extent that there's a reduced consumption, it would reduce revenues. But there's no link between gas prices and our excise tax revenues.

[Brian Masse, NDP, Windsor West, ON]

I beg to differ. You actually said, “...that cause motorists to drive less and reduce their consumption of motor fuels, federal excise tax revenues could actually decline”. That's actually in your presentation, yet you're saying that—

[Lise Potvin]

I believe I said, “To the extent”.

[Geoff Trueman, Chief, Air Travelers Security Charge, Sales Tax Division, Tax Policy Branch, Department of Finance]

Actually, if you look at the numbers, one thing that's very interesting was your mention of a 0.8% increase. That's actually far lower than the long-term 10-year trend for gasoline, which is a 1.7% increase each and every year. So what we've seen actually is that prices have had an impact on habits.

For the last three years, the volumes have been quite interesting. Starting at 40.9 billion in 2004, we dropped down to 40.8 billion in 2005, and then we snuck back up to 40.9 in 2006; vis-à-vis the long-term trend, we've seen quite a change. It'll take a few more years to play out, but we'll certainly see what happens.

[Brian Masse, NDP, Windsor West, ON]

The current Prime Minister rose in the House of Commons in 2004 and said this:

Mr. Speaker, the Prime Minister will know that across the country Canadians are struggling with record gas prices. Canadian businesses are being hurt. Canadian consumers are burdened with the difficulties this is causing, but the government itself is rolling in record gas tax revenue.

I can go on and on with a number of different questions from several different government members that claim that with the rising price of gasoline, GST revenues go up.

Is it false or is it true that your GST revenues have been going up over the last number of years, related to the increase of gasoline? Who's right and who's wrong?

[Geoff Trueman]

GST revenues do vary with the price, but the excise tax revenues do not vary with the price.

[Brian Masse, NDP, Windsor West, ON]

But on your overall government money coming in from the price of gasoline, the argument that went on for many years in the House of Commons was that the rise of gasoline prices resulted in increased GST revenue for your department. Did that happen, or did it not happen?

[Geoff Trueman]

For the consolidated revenue fund, revenues from the GST would increase as gasoline prices increased, yes. Revenues from the excise tax on gasoline are linked only to the volume of fuel that is sold.

[Brian Masse, NDP, Windsor West, ON]

Right, if volume has gone up, and—

[Geoff Trueman]

Volume has gone up over the long term. What we've seen over the last three years is actually a plateau, a stabilization point.

[Brian Masse, NDP, Windsor West, ON]

Well, 0.8%...it's still 1%, at the very least, in the last statistics.

[Geoff Trueman]

For what year was that?