Industry Committee on June 22nd, 2011

[John Carmichael, Conservative, Don Valley West, ON]

Mr. Greenberger talked to 89.2% capacity at the refineries in the U.S. in the last couple of weeks. I wonder if you could give us some understanding of what our Canadian refineries are working at.

[Tom Huffaker]

I'm afraid I'm going to be frustrating again. I really feel bad about it, but again, on the refining end of the industry, it's really CPPI. Mr. Boag and those folks represent the refiners, we do not. I could not even venture to guess, because it's not something I follow day to day, what the refining capacity utilization is in Canada.

[John Carmichael, Conservative, Don Valley West, ON]

I'm not trying to be difficult—

[Tom Huffaker]

Oh, no, I know you're not.

[John Carmichael, Conservative, Don Valley West, ON]

I just felt, from a refining perspective, you might have some of those answers.

Do you know or do you have any thought as to what influence your member companies would have over the pricing of a barrel of oil? Or would they have an influence at all?

[Tom Huffaker]

My instinct would be that they don't have an influence over the price of a barrel of oil. They're out there competing in a global economy, with a global commodity, doing their best to be able to produce the product at a price that allows them to make a profit when they sell it into that global market.

[John Carmichael, Conservative, Don Valley West, ON]

Obviously, as politicians we're receiving calls from our constituents, so we're at the grassroots. We're hearing from people at the pumps who are frustrated. They can't understand why all four stations on a corner spike their prices within minutes of one another. Our job is try to find some understanding or answers so that hopefully we can bring some sustainability to this, rather than just continued volatility.

As you've come here today, you knew what we were talking about.

[Tom Huffaker]

Yes.

[John Carmichael, Conservative, Don Valley West, ON]

Do you have any thoughts, in your experience, as to what should be done to stabilize prices so that we can provide less fluctuation and better answers for the consumers and our constituents across Canada?

[Tom Huffaker]

I really don't have an answer to that question. We believe in competitive markets. Our members compete in highly competitive markets. We accept that some movement in price is part of the reality. Obviously, from an industry point of view, there are times when the industry is very profitable and there are times when the industry runs very, very tight profit margins. Our bias is towards letting the market work those things out.

I guess we could say that if we create a regulatory environment and a fiscal environment that incents production but that has to be almost on a global basis, such that more product comes on the market, that will have some moderating impact on prices. If you look at natural gas, not the topic today, the tremendous robustness of supply has clearly been shown to have a very, very sharp impact on prices.

[John Carmichael, Conservative, Don Valley West, ON]

Maybe I'll ask one last question, then. I'll try to hit something that I think might be a little closer to home for you.

I wonder if you could give us a sense of what is returned to Canadians through your industry. Now, you covered some numbers, but in terms of the sector's direct contribution to the economy--jobs, pensions, other investment funds, things along that line—you talked about 500,000 jobs and exports of $65 billion, $50 billion on the oil side, and I wonder if you could maybe give us a little more information in that area that would help us better understand the scale.

[Tom Huffaker]

Yes, I could a little bit.

[The Chair, Conservative, David Sweet]

Mr. Huffaker, I'm sorry, the time is up. If you can save that question of Mr. Carmichael's and then maybe on another person's question you jam some of those stats in, that would be great. I apologize. All the members have heard me say before that time is always our enemy in this.

Now we'll go over to Mr. Masse for seven minutes.

[Brian Masse, NDP, Windsor West, ON]

Thank you, Mr. Chair.

Thank you for being here.

To Mr. McTeague, you noted some important issues: the volatility, our becoming net importers—and a lot of Canadians or Ontarians wouldn't even realize that—and as well as the issue with the United States. There's been a proposal to have an ombudsman office. Can you expand on the volatility issue, and then also whether or not an ombudsman office, with dedicated resources, which could go directly to the minister, would provide some empowerment and oversight and maybe a better playing field—we've seen a lot of vertical integration in this industry—and whether or not that could actually be addressed through that type of an office?

[Dan McTeague]

Mr. Masse, it certainly wouldn't hurt. There are a lot of vested interests. In my experience of 19 years of looking at this, a lot of people have looked at this and from certain perspectives have used the industry's own figures to summarize what I've just done. I'm glad to see that Mr. Greenberger agrees with some of the comments I've made, including the irony of supply increasing today yet the price of fuel going up in Canada as in the United States.

The idea of an ombudsman who would in effect be an independent umpire is perhaps an idea that should be considered very strongly, considering the not-so-subtle but dramatic changes that have taken place that are affecting the bottom line, bread-and-butter affordability issues for Canadians.

When we refer to gasoline, this is only one of many where we have seen substantial increases. Probably Mr. Greenberger and I would agree. We have never met, nor have we spoken before, I can assure you of that. Wheat this past year alone is up 78%. Corn is up 52%. Gasoline is up 37%. Crude is up another 30%.

What is really critical to understand here, and perhaps Mr. Huffaker and I would also agree on this, is it does the industry no good to have prices, as we saw, go up without any rhyme or reason or any bearing on supply and demand fundamentals, to $147 a barrel, then three months later drop to $31 a barrel. I can tell you that was disruptive, not only to the oil industry but it did nothing to ensure that in the long term Canadians could rely on greater refinery capacity.

I suspect that in the United States, with Sunoco having shut down some of its refinery capacity, some of the decisions that were done with respect to Montreal east last year had a lot to do with that unpredictability. The volatility can be controlled, and it must be the role of governments, however they can do this, to ensure there is global oversight over the commodities derivatives markets. If we avoid this point, I don't care how many competition inquiries these committees do, you are going to fail to address the fundamental concerns of Canadians on volatility. An independent ombudsman would be an important step that could bring together the shortcomings of Natural Resources Canada supplying to the United States weekly petroleum information for Americans.

Page 29 will show you we're providing Americans data about their own industry and what we're supplying here, but we're refusing to give it to Canadians.

We've ensured the Competition Bureau is brought up to speed with some of the other best practices, with which they are very involved around the world, in terms of how Europe and the United States are dealing with their antitrust legislation.

We could at the same time resolve this problem of economic interests of economists, who might be in favour of efficient markets, and those out there who obviously have a stake in protecting their territory.

At the end of the day, an umpire would be there to serve as an officer of Parliament, perhaps, and ultimately serve to expose and to ensure that the truth is maintained on a monthly, bi-weekly, or whatever basis you choose. It is an idea whose time has come.

[Brian Masse, NDP, Windsor West, ON]

Thank you.

I'm going to turn the rest of my time over to Mr. Thibeault, but I just want to quickly thank Mr. Greenberger very much for participating. Your testimony is very important, and we would like to follow up to hear more on it in the future.

Just to correct the record, our banks here in Canada attempted to Americanize themselves but were fended off by a number of us here in Parliament, and the record shows that. I have the decks from the lobbying they did of my office, saying they needed to become like the U.S. to protect our economy.

Mr. Thibeault.

[Glenn Thibeault, NDP, Sudbury, ON]

Thank you.

How much time do I have, Mr. Chair?

[The Chair, Conservative, David Sweet]

You have three minutes.

[Glenn Thibeault, NDP, Sudbury, ON]

That's wonderful.

I'd like to start my questions with either Madam Johnson or Monsieur Bilodeau. I would like to hear your thoughts on the fact that gas prices seem to vary from region to region but then within those regions different retailers' prices always seem to remain identical.

[Richard Bilodeau, Acting Assistant Deputy Commissioner, Civil Matters Branch, Division B, Competition Bureau]

Thank you for your question.

As we heard in the previous panel, prices in regional and even local retail markets are affected by a number of different factors. Leaving aside the price of crude oil and the wholesale price, there can be a variety of factors in the rack price, such as the type of gasoline station in the market, whether it is a high- or low-volume gas station, the throughput, the number of competitors in a particular market, and also the aggressiveness of competitors. There are possibly markets--and I'm not even talking about regional markets.... In some local markets a competitor can be a maverick, if you want to believe it, who likes to price as low as he can. A variety of factors will affect retail prices in different markets.

As to your question about why we sometimes see prices move in lockstep, what we heard previously is true. It is a market that is fairly transparent. At street level it is very easy for clerks in individual gasoline stations to look across the street or down the street or even drive around the local town to identify what the price movements are and make a decision at that point either to move them upward or downward or to have them stay where they are.

[Glenn Thibeault, NDP, Sudbury, ON]

I'll give you an example. I'm sure that Mr. McTeague can comment on this as well.

If you're leaving Toronto and driving north, up to my community in Sudbury, you're filling up in Toronto—I'm going to pick a number out of the air—at $1.28. You get up to Parry Sound and you're at $1.30. You hit Sudbury and you're at $1.39. Go west for a half an hour and you're at $1.26.

What gets us, especially in northern and rural areas, is that there seems to be some type of...I don't want to use the word “collusion”, but that's what the communities are talking about. That's what people are talking about, right? They're asking why it is that they can drive 20 minutes outside of my community and get gas at 15¢ to 20¢ a litre cheaper. So if we're looking at competition, there seems to be something going on.

[Richard Bilodeau]

Again, going back to the different factors, if you're coming out of Toronto and you're heading out of town, different things can affect it--how far a certain local municipality is located from the refinery.... You add transportation costs. Obviously that's one of the—

[Glenn Thibeault, NDP, Sudbury, ON]

Then here's what my question would be, and maybe I'll direct this to Mr. McTeague, just to give everyone a fair shot at this. Why is it that in Sturgeon Falls, which is farther away from a refinery than Sudbury, gas prices are cheaper than they are in Sudbury?

[The Chair, Conservative, David Sweet]

Mr. McTeague, I'm sorry, your response is going to have to be in the bank as well.

[Voices]

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