Mr. Speaker, I will be sharing my time with my hon. colleague, the newly minted Minister of Natural Resources.
On behalf of the government, I am very pleased to respond to the motion before the House. There are few occasions when one gets an opportunity to debate an issue with such direct and obvious consequences for Canadians. The price of energy, the price of oil, home heating oil and gasoline is something that all of us deal with in our daily lives. It is something we have seen and felt in terms of prices at the pump in our communities.
We see it through the whole chain of energy prices. The price of electricity is affected by the price of oil and natural gas and coal. All of these are energy products. There is a complete chain of prices affected by some of the gyrations we have seen in recent months to world energy prices and it has effects throughout our economy. It has effects clearly in our ridings where people driving to work face substantial increases in the cost of commuting to work, in the expense of earning a living. We see it as well in commercial areas. In my province of British Columbia the price of oil and fuel was a fundamental cause behind the dispute at the port of Vancouver this summer. That dispute had major implications not just for British Columbians but for all Canadians as we saw shipments and containers held up at the port.
We can all see there are specific ways in which the price of gas and oil does affect Canadians and the economy in a number of ways. It is important to bear in mind the underlying causes of the current price situation we are facing, whether we are talking about the price of gas, diesel, heating oil, propane, natural gas or any of the other energy products that are part of the energy chain. We all recognize that there is no silver bullet. There is no magic solution that is going to quickly realign international supply and demand and bring prices back down very quickly.
Let me touch on some of the fundamentals of the supply and demand for gas and oil. Clearly, oil is a globally traded commodity. There has been strong demand around the world but it is combined more than ever before with uncertainties about the supply of oil, the reserves and various other shorter term disruptions to supply.
If we go back to January 2002, the world price of crude oil was about $20 U.S. per barrel. Today it is more than $60 per barrel. On a Canadian average basis the retail price of gasoline was 73.2¢ per litre in 2003. Over the first eight months of 2005, it averaged 89.4¢ per litre and of course today it is over $1 a litre.
We hear a lot about the tax issue as one of the drivers of the price of gas and oil, but the reality is that of the 16.2¢ per litre increase between 2003 and the first part of this year, 14.9¢ per litre was crude oil costs. That means that less than a penny, or .8¢ per litre was accounted for by federal taxes. Just half a cent was made up of provincial taxes on average.
If we look at the rise in gasoline prices and we recognize that it has been driven by international market conditions, we should look at those market conditions. Clearly the impact of recent hurricanes on the American oil and gas sector in the Gulf of Mexico was a major factor, but it was a temporary factor.
There are other longer term factors. In fact, the Prime Minister pointed out one of them recently. When he spoke to senior public servants on September 20, he mentioned the major forces shaping the future for Canada and this government's agenda. One of those was the rise of nations such as China and India as global economic powers. He stated:
Consider that in 2004, as measured by purchasing power parity, the United States accounted for about 20% of the global economy with less than 5% of the world's population. Together, China and India also accounted for almost 20% of the world's economy, but with 40% of its population -- so it's clear where the growth potential lies.
It is not just potential. It is happening now as we speak.
It takes a lot of energy to run the factories of China and to get products to markets overseas. It takes a lot of energy to power the growth of emerging consumer societies with a rapidly expanding middle class and populations that strive to achieve the kind of standards that we have in North America. They see energy use as a critical part of achieving those increased living standards.
Since 2001 China and India's demand for oil has grown by more than 2.3 million barrels and that is per day. This accounts for nearly 36% of world oil demand growth during this period. In 2001 China and India accounted for 9% of world oil demand. Today they account for 11% of that demand. It is a trend that will likely continue. That is on top of the growing demand for energy from the traditional high demand industrial economies like Canada, the United States and Europe.
These are some of the fundamental drivers of the rising demand for oil. It drives the demand for natural gas and the products that are made from gas as well, but supply issues are also important. World crude oil production capacity is still exceeding demand, but the gap between supply and demand has been closing in recent years.
The OPEC countries used to have spare crude oil production capacity of between four million and six million barrels per day. They could bring this spare capacity into production in less than 30 days and take the edge off price spikes as a result. Estimates today are that spare capacity is now down to less than two million barrels per day.
Not only is demand rising and supply not keeping pace, but there are other factors. There are a lot of steps in the supply chain between crude oil coming out of the ground and gasoline going into our cars' gas tanks or heating oil going into the tanks in our basements.
Consider the capacity for petroleum refining as an example. Today the refinery capacity all around the world is operating virtually full out. Here in North America both American and Canadian refiners are operating at 97% utilization rates, which for all intents and purposes is operating full out at full capacity. As the demand for petroleum products continues to grow, the refining system's inability to keep pace is going to lead to continued upward pressure on prices.
Why not build more refineries? An important part of the answer has been that these are big and extremely expensive investments. Until quite recently the profit margins in refining were simply not good enough to attract more investment into the refining business. The bottom line is that the refining business is going to have to become more profitable to attract the kind of investment that will be required to increase refining capacity and deal with that weak link in the supply chain.
Many hon. members may ask what the world market has to do with Canada. Are we not self-sufficient in oil and gas? The reality is that we may be, but we represent only 3% of the world's crude supply and that really means we are a price taker. We cannot affect the world price.
Hon. members will have suggestions tonight as to what we should do about this situation. I want to talk a bit about price monitoring. I am very comfortable working with my colleague, the Minister of Natural Resources, to develop a more transparent, authoritative mechanism for analyzing and keeping track of energy, oil and gas prices in Canada. I am very happy to hear members' suggestions and comments about that. I think it is something that we should consider. Our citizens and consumers and businesses have the need for good information and if we need to create a new mechanism to do that, let us do it.
With respect to competition, I have said many times that there have been at least five investigations in the last 15 years into the competitive conduct in the gas and oil business. No anti-competitive behaviour has been found.
Clearly, I believe that Bill C-19 which is before the House would help us with administrative monetary penalties. I am open to suggestions from hon. members as to further amendments that we could make to the Competition Act, such as giving the Competition Bureau the power to initiate its own investigations without reacting to a complaint. I am open to other suggestions as to what we might do with the Competition Act that could be helpful in dealing with this situation on behalf of Canadians.