Evidence of meeting #70 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 gasoline.
A recording is available from Parliament.
Conservative
Conservative
Dave Van Kesteren Conservative Chatham-Kent—Essex, ON
Yes.
Thank you for coming. This has been fascinating.
What I'm hearing is that economics 101 works in your industry as in any other industry.
Tell me, do we import any refined fuel? You say we're a net exporter, but do we import any?
Vice-President, Public and Government Relations, Canadian Petroleum Products Institute
Yes, we do. I can get you the exact number if you like. Our balance is such that we're net exporters.
Conservative
Dave Van Kesteren Conservative Chatham-Kent—Essex, ON
Is a two-year write-off for capital expenditures going to help, say, for the proposed refineries in Sarnia? You mentioned two in the east as well. Will that make a difference?
Vice-President, Business and Communications, Canadian Petroleum Products Institute
Absolutely.
Conservative
Vice-President, Business and Communications, Canadian Petroleum Products Institute
In the integrated companies you're competing for funds versus investments in the tar sands or gas wells or oil wells. If they can get 100% write-off—The average return on capital employed in the upstream is about 30% plus. It depends on the company. If they're investing in that business at 35%, they can invest in the refining at 17%. There isn't enough money to do everything. There aren't enough people—there are lots of other issues—and skilled labour to do everything, so you have to pick your winners.
Conservative
Dave Van Kesteren Conservative Chatham-Kent—Essex, ON
Okay. So good government policies will, in effect, bring down the price. If we have less regulation—and we're not talking about regulation where it is necessary, but the regulations at the—
Sorry, Tony, it looked like you wanted to jump in.
Vice-President, Public and Government Relations, Canadian Petroleum Products Institute
We're at a crossroads in this country, and it's an important crossroads. We have a public that is demanding action on the environment, action on climate change, low gasoline prices, and other things as well. There is going to come a point in time where all of these requirements are not reconcilable, and it's going to be a tough transition for all of us--members of the CPPI, the Canadian public, and public policy makers. We are at that crossroads. There is no doubt about it. Our hope is that as we chart down this path, we will base our decisions on science and economic impact as well as our contribution to the rest of the world.
Conservative
Dave Van Kesteren Conservative Chatham-Kent—Essex, ON
In essence, if we decrease our demand, then we can actually see some reduction in prices. That is just softening the prices. As I said, it's all economics 101.
Vice-President, Public and Government Relations, Canadian Petroleum Products Institute
It's all relative. Again, I would underscore the fact that we're a North American marketplace, not just a uniquely Canadian marketplace. So if demand skyrockets in the United States while it comes down in Canada, Canadians will be spending less on fuel, but that will not necessarily manifest itself in price movement.
Conservative
Dave Van Kesteren Conservative Chatham-Kent—Essex, ON
There's a federal political party that's arguing in their platform that the Government of Canada should impose a $500 million surtax on the profits of oil companies as a measure to curb their profits. Can you explain to this committee what impact a surtax like that would have on member companies and consumers at the moment?
Vice-President, Public and Government Relations, Canadian Petroleum Products Institute
I'm not sure that tax plan was targeted to the refining industry, but as a general rule, corporate taxes.... If they're not competitive with comparable jurisdictions, they will see a loss of economic activity within their own jurisdictions in favour of somebody else, especially in the context of a commodity that is used virtually all around the world.
Conservative
Dave Van Kesteren Conservative Chatham-Kent—Essex, ON
So we would drive the oil companies outside Canadian borders and we would just wind up buying from different sources?
Vice-President, Public and Government Relations, Canadian Petroleum Products Institute
If they have comparable investment choices, yes.
Vice-President, Business and Communications, Canadian Petroleum Products Institute
And that is what happened in the U.S. refining industry.
Conservative
Dave Van Kesteren Conservative Chatham-Kent—Essex, ON
I wonder if you could explain something quickly. You say we're being asked to exceed the performance requirements of our principal competitors—the United States—at significant cost. In respect of the GHGs—I don't know if I'm going to have time for this—I just need some clarification on that part of your briefing. You don't have a page number, but it follows a graph.
Vice-President, Public and Government Relations, Canadian Petroleum Products Institute
Is that the chart in respect of GHGs?
Conservative
Dave Van Kesteren Conservative Chatham-Kent—Essex, ON
Yes. I just need a little clarification on that. I don't quite understand it.
Vice-President, Public and Government Relations, Canadian Petroleum Products Institute
There were some key points to this. I could go on for 30 minutes too, but I'll keep it to 30 seconds.
First of all, the pricing of compliance costs requires certainty for business planning. If you don't know what the price is, you don't know how to input that into your business model.
Secondly, the diminishing access to offsets assumes a certain amount of technological innovation, which, again, is uncertain. We don't know that some of the stuff that everybody is hoping is going to work is going to work. What we do know, at least in those two examples, is that our U.S. competitors simply don't face this issue right now. They may, in which case the field may level, but we don't know that, and uncertainty is the worst thing you can do to a business.
Conservative
Liberal
Dan McTeague Liberal Pickering—Scarborough East, ON
Thank you.
Mr. Baily, I have a question for you.
The crack spread today between crude and refined gasoline in the United States is 17.5¢ a litre, as of about 3 o'clock our time. I'm going with $226.43 for U.S. gas and I'm going with $69.09 for crude. I think it's WTI, but there's probably a blend of Brent and others in that, which we are using out here.
The wholesale price established by your members—$423—would give me, nine minutes ago, 68.8¢ for Ottawa, which is down two-tenths of a cent from Friday and, the same thing, down two-tenths of a cent in Toronto, 68.7¢. Montreal remains unchanged at 67.9¢.
I'm wondering how much competition is required for your member industries to come to the identical wholesale price posted for tomorrow morning's gasoline, which will mean here in Ottawa gasoline will sell for $1.053 cents per litre and in Toronto for $1.043. How do you do that in one hour? How do you come to the identical wholesale price, which will be posted tomorrow at your stations? Unless, of course, given the fact that I say this, you'll do it to spite me, and they won't be.
