Mr. Speaker, I was describing the large degree of concentration in the oil industry. In Toronto, for example, 75% to 85% of all retail gasoline sold is priced by the major oil companies through controlled operations.
The major oil companies say that at the retail level the competition is very fierce and intensive and the economics are very poor.
The independents are certainly struggling and fighting for market share against the majors. The independents do not have some of the opportunities which some of the major companies have. They are unable to develop the ancillary services that a lot of the major oil companies are doing today: car washes, convenience stores, et cetera. They cannot access the capital to do these types of things.
The banks will not touch the independent retailer of gasoline because they are concerned about how long they will be in business and what they call site remediation or environmental problems with sites. The small independents cannot get capital from the banks. The banks have said categorically that they will not look at them.
What about the majors? Are they making money at the retail level? They say they are not, but if we look at their annual statements we could not tell because that information is just not provided. Even if we could decipher that from their annual statements, the fact is that major oil companies price the product right through the whole chain. They are integrated oil companies so they explore, drill, extract, refine, market and retail. These are big oil companies such as ESSO and Shell. They control the price at the wholesale level which they call the rack price.
They say they have to charge the rack price at a certain level because they are concerned about product substitution from the United States. In other words, if they price their product too high, independent retailers and others would import gasoline from the United States.
In our consultations we discovered that in theory that is interesting but in actual fact there are the problems of importing gasoline, particularly in eastern Ontario and other parts of Ontario. They are faced with transportation costs, a lack of storage and terminal infrastructure, and a lot of red tape and bureaucracy. In my view one would need at least an 8 cent per litre spread to make it worth while to import gas from the United States. I think the argument of product substitution is a little weak.
Since 1991 many independents have unfortunately left the Ontario market. There could be a short term benefit for Ontario consumers because of the kind of pricing that goes on in the marketplace. What about the medium and long term? We have some evidence to show what happens in cases like that.
In New Brunswick and Newfoundland where there are very few independents the prices at the pump are among the highest in Canada. What my colleague's bill addresses is referred to as predatory pricing, in other words pricing designed to put others out of business.
There are industry experts who believe that major oil companies are trying to squeeze out the independents. I would just like to cite a study by Bloomberg's which reads:
—major oil companies were going to use price wars, new credit terms, and the strategic closure of service stations and refineries to squeeze independent gasoline retailers out of the market in central Canada.
Another study by ScotiaMcLeod suggested:
To set the stage for a better downstream environment beginning in 1993, it is our opinion that Imperial Oil Ltd. has put a strategy in place in 1992 to discipline the retail markets, with the aim directed at the independents.
Likewise Wood Gundy stated:
Imperial, Shell Canada Ltd. and Petro-Canada Inc. have targeted the country's independent marketers as being their most effective competition and with the current wave of rationalization, are trying to get their cost structure down to the same level as independents, who enjoy a two to four cent per litre advantage over the majors.
That is because of their lower cost structure. They do not have all the overheads to support. I think my colleague's bill addresses very well the question of predatory pricing.
I would now like to talk very briefly about the Competition Act and the competition bureau. Many Canadians have complained to the bureau and the bureau because of the legislation conducts its investigations by seeking meetings among the majors, and even at the local level, where they sit around at Tim Horton's and set prices. That does not have to happen because there are few at that level. They are price leaders and price followers. They do not have to sit around and discuss and decide on prices.
We need some beefing up of the Competition Act and to change the criminal burden to more of a civil burden.
In conclusion I sum up by saying Bill C-235 if passed would protect the independents we need to ensure a competitive marketplace. By ensuring that the integrated oil companies priced their product to independents at the same price they charge their own dealers we would ensure good prices for gasoline in Canada and for Canadians.