Mr. Speaker, I am pleased to have this opportunity today to discuss Canadian oil markets and the recent changes in the international situation which have resulted in major increases in the price of petroleum products in Canada.
The Government of Canada understands the difficulties Canadians are currently facing due to rising energy prices. Energy matters more to Canada than to any other advanced economy in the world. The products produced by these sectors generate $60 billion in exports and are an important source of our international trade balance. More than 230,000 Canadians work in the energy sector in well paid, highly skilled jobs often in remote regions of the country. As such, energy plays a crucial role in supporting a high living standard for Canadians.
Partly of course this is a matter of our geography and climate, but the cost of the energy supplies that Canadians purchase has an important impact on their economic well-being. Consequently, increases in energy prices naturally attract a good deal of attention.
Since January 2002, world prices for crude oil have more than tripled, from $20 US to over $60 US a barrel, which corresponds to over 30 cents a litre in Canada.
In recent weeks all Canadians have been conscious of increases in the price of gasoline. Much of this increase has been weather related. It has been due to the damage caused by Katrina and concerns that Rita could cause even more damage in the refining sector. This has caused a rather anomalous situation where gasoline prices have increased much more rapidly than crude oil prices. However, if we take a step back and look at longer term trends, it is clear that gasoline prices have moved almost lock step with crude oil prices.
As an example, the average price of gasoline country-wide was 73.2¢ in 2003. So far in 2005 it has averaged 84.9¢ a litre, an increase of just over 16¢. In other words, the increase in gasoline prices over the longer term is fundamentally due to an increase in the price of crude oil.
There are a number of reasons behind this large increase in crude oil prices.
The situation was exacerbated by the unprecedented demand for oil products in less developed countries, China and India in particular. Since 2001, the demand in these countries has increased by over 2.3 million barrels a day. This represents close to 36% of the world increase in demand over that same period. China and India now account for 11% of the world demand.
At the same time as OPEC's spare capacity was falling, there were growing concerns in the market about political instability in a number of important oil producers. That led to an increase in the risk premium on crude oil. In other words, people were willing to pay higher prices to ensure supply in the future and that risk premium may have been exacerbated by an increase in activity by non-commercial traders or speculators. They represented 3.5% of the crude oil futures market in 2003, but over 20% by the summer of 2004. A number of international factors over which Canada has no control have combined forces to produce this very high world price of oil.
I am sure it is of interest to members of the House and to Canadians what the federal government can do in the face of these large price increases. First, as my colleague, the Minister of Industry, has said, we are working very actively on a monitoring process to improve transparency.
In terms of the immediate challenges following Katrina's impact on oil prices, the Government of Canada also has been working closely with its international partners to ensure that Canada and other countries have access to adequate supplies of oil at prices that are as reasonable as possible.
The government also is actively looking at measures it can take domestically to protect Canadians who are particularly vulnerable to increasing oil prices. Here I note that the Minister of Finance and the Prime Minister have said that the government is looking at ways to assist Canadians and I am sure that an announcement about these deliberations will be forthcoming in the not too distant future.
In addition, the federal government can help Canadians become more efficient in the ways that they use energy and to develop fuels that can substitute and compete with petroleum. This is an area that is of great importance to my own department. Essentially this is a matter of supply and demand, concepts with which I have some familiarity given my background. This is important in the medium term where we will work to increase the supply of non-oil sources of energy, while at the same time reduce the demand for oil through measures to improve energy efficiency. It is in those two areas, by both reducing demand and increasing supply, that we will move to reduce the dependence of Canada on oil. This will not bring relief tomorrow, but over the medium term these are measures which will produce significant benefits for Canadians, including an improvement in the quality of our environment.
We have begun this process and we are making progress. In transportation, we have many programs in place aimed at raising awareness among drivers about how they can make smart choices.
In my own riding of Markham, the town council, led by Mayor Don Cousens, recently passed a bylaw limiting idling time to three minutes. We may think this is not a big deal or huge thing, but if every municipality in the greater Toronto area and across the country were to adopt measures such as this, one would save a lot of gas and one also would improve the environment.
We are also working to diversify our sources of fuel. We have announced $118 million from the ethanol expansion program for the construction of new ethanol plants and this will greatly increase the availability of this renewable fuel. In addition to measures regarding wind energy announced by the Prime Minister last weekend in Prince Edward Island and measures regarding clean coal, all these I believe are vital in the medium term.
We also are supporting Canadians in their effort to make their homes more energy efficient. We have information available to give advice on how to do this. We also have a retrofit incentive that will help Canadians cover the cost of making energy efficiency upgrades. Through our program EnerGuide, evaluators go to people's homes, do a thorough assessment of energy use and make recommendations for improvements. A grant is then based on the measurable improvements that the homeowner makes. This program has been highly successful, which is why it was quadrupled in budget 2005.
We are also working with industry to make their own operations more energy efficient through the Canadian industry program for energy conservation. Since 1990, CIPEC companies associated with this program have collectively reduced greenhouse gas emissions by more than 25 megatonnes from what they otherwise would have been. They have saved billions of dollars in energy costs as a result.
The government itself is also doing its bit through our federal house in order program. We have set a target to reduce emissions from our own operations by about one-third and we are well on our way to achieving that target.
In conclusion, the government recognizes the challenges faced by many Canadians as a result of the increases in energy prices. The government has been active on many fronts to help ease supply disruptions, support energy efficiency, and facilitate the development of alternative fuels. We will continue to work on a plan to deal with the rising cost of energy.