Evidence of meeting #68 for Industry, Science and Technology in the 39th Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was prices.
A recording is available from Parliament.
4:20 p.m.
Conservative
The Chair Conservative James Rajotte
Okay, thank you
Thank you, Mr. Shipley.
We'll go to Mr. Vincent.
4:20 p.m.
Bloc
Robert Vincent Bloc Shefford, QC
Thank you, Mr. Chairman.
With regard to competition, when two companies are selling the same product, will they not naturally try to lower the price of that product to get more of the market share? In my opinion, this is what competition is about. Do you agree?
4:20 p.m.
Commissioner of Competition, Competition Bureau, Department of Industry
We see that there are fluctuations in gasoline prices.
4:20 p.m.
Commissioner of Competition, Competition Bureau, Department of Industry
It is a cycle, this is what we see on the market—
4:20 p.m.
Bloc
Robert Vincent Bloc Shefford, QC
I am sorry to interrupt you.
Here is my question: in your opinion, does free competition, whether it be among oil companies or other companies that sell the same product, consist in trying to grab a bigger market share by selling the product at the lowest possible price? In your opinion, is this what competition is about?
4:20 p.m.
Commissioner of Competition, Competition Bureau, Department of Industry
No, it depends. It involves choice, innovation or quality. It can be different for different markets.
There is no such thing as a perfect market in which all companies sell the very same product, a market that involves six, seven or eight competitors as described in economics text books. There is no such thing. It is an exception.
4:20 p.m.
Bloc
Robert Vincent Bloc Shefford, QC
All right.
Could you explain why a barrel of oil cost $73 and a litre of gasoline cost $1.06 a year ago, and why gasoline costs $1.15 a litre today, whereas a barrel of oil only costs $61? I find it difficult to understand how this is possible. I understand why oil is at this price and I will tell you why. There are two reasons for this.
Just now, you spoke about the abuse of dominance. How can we have fair competition if, in Halifax, Esso is doing the refining for all the oil companies; Irving is doing the same in New Brunswick; Ultramar is doing the same in Quebec and in Montreal, Petro-Canada and Shell are doing the same. How can we have fair competition when the same refiner is supplying everyone? I do not see how there can be fair competition in a market where the same refinery is supplying everyone.
Then, you said that for refining costs, we cannot have.... You spoke of a price for refining.
In the magazine Les Affaires, it says that ExxonMobil made a whopping $9.3 billion in the first three months, as compared to $8.4 billion last year. Nevertheless, the sales figures for the biggest oil company in the world went down by 2%. Now although the figures went down, the profits rose nonetheless by 10%. Do you know why? Since ExxonMobil's revenue went down, how come the giant still made a bigger profit? We have to take a look at profit margins. Thus, the price of oil was brought down from $73 to $61 a barrel, but in order to make the same profit, the price of refining was raised. It is easy to do this, and all the oil companies benefit from it, because there is a refiner in each province. Therefore, a refiner that makes a 14¢ profit can decide to make a 27¢ profit on the next day because the price of a barrel of oil went down.
Do you really think that this is not a dominant position?
4:20 p.m.
Commissioner of Competition, Competition Bureau, Department of Industry
I am not sure whether I understood all your questions.
First, you spoke of the price of oil, its fluctuations and how it reflects on current market prices. I think that this is what your first question was about.
4:20 p.m.
Commissioner of Competition, Competition Bureau, Department of Industry
Regarding this matter, I will let my colleague explain this to you after my intervention. However, the people from Natural Resources Canada are in a better position than we are to describe how—
4:20 p.m.
Bloc
Robert Vincent Bloc Shefford, QC
You are in charge of the investigations. You should be interested in finding out why refining went from 14¢ to 27¢ at the same time as the price of a barrel of oil went down.
4:25 p.m.
Commissioner of Competition, Competition Bureau, Department of Industry
No.
June 11th, 2007 / 4:25 p.m.
Commissioner of Competition, Competition Bureau, Department of Industry
We do investigations when we see that the law may have been broken. We have a very clear mandate regarding this. We see whether or not there is price fixing. If we think that there is any evidence of price fixing, we can go ahead. What you are describing, on the other hand, is the way in which prices fluctuate on the market and the reasons for the fluctuations.
4:25 p.m.
Bloc
Robert Vincent Bloc Shefford, QC
No, I am not talking about fluctuations of prices on the market. I am telling you that when the price of a barrel of oil goes down, the price of refining goes up.
4:25 p.m.
Commissioner of Competition, Competition Bureau, Department of Industry
Yes, this is possible.
4:25 p.m.
Commissioner of Competition, Competition Bureau, Department of Industry
Because things can vary according to certain criteria and other factors. The price of crude oil does not always impact the final retail price. Richard or the people from Natural Resources Canada can give you more details.
Secondly, when you speak of refineries and provinces, the distribution of refining operations does not constitute a provincial market. We are looking at this in a broader context, because oil can be sent out of the province. Besides, Richard spoke of the number of competitors that could exist on the same market.
Then, you spoke of the profit margins of big companies—
4:25 p.m.
Commissioner of Competition, Competition Bureau, Department of Industry
—oil companies. As I said, we do not regulate prices and profits.
4:25 p.m.
Conservative
The Chair Conservative James Rajotte
Okay. I'm sorry the time is up.
We'll go to Monsieur Arthur, the final member.
4:25 p.m.
Independent
André Arthur Independent Portneuf—Jacques-Cartier, QC
Thank you, Mr. Chair.
Good afternoon, Ms. Scott. Price fixing is forbidden. Anyone caught fixing prices will be punished. Price fixing happens when sellers are stupid enough to fix prices over the telephone.
4:25 p.m.
Commissioner of Competition, Competition Bureau, Department of Industry
They do it either in writing or verbally.
4:25 p.m.
Independent