Mr. Speaker, I am pleased to be sharing my time today with the member for Skeena—Bulkley Valley. I appreciate the opportunity to engage in this debate.
I will begin by reading the motion proposed by the Bloc:
That, in the opinion of the House, the government should establish a plan to counteract the negative effects of repeated increases in gas prices, specifically including: a surtax on the profits of major oil companies, the creation of a petroleum monitoring agency, and the strengthening of the Competition Act.
I agree with the majority of those initiatives.
I want to begin my speech by addressing a theme that has always been pushed back against those who have questioned this industry, and that is we want the free market to determine the path and the course of prices set out for consumers.
I do not know where that fantasyland exists, but it is certainly not in this market. We have everything from speculators in Chicago, New York and Toronto who determine hedge funds, as well as the splitting of stocks which can affect the price of a barrel of oil on a regular basis. In fact, more paper barrels trade per day than actual barrels pulled out of the ground.
Plenty of different examples of interventions happen in the market, not only in North America but across the world. We know that Russia recently intervened in its market. Russia is one of the biggest exporters as well as having domestic production.
There are situations for example in South America where Venezuela has begun to re-nationalize or at least put some additional accountability on its resources that are being exported and also used in Venezuela. In fact, what is interesting is the Hugo Chavez government is now providing gasoline products to the United States in different depressed areas where consumers are being hosed at the pumps.
We are talking about having a sense of balance in everything. There is nothing wrong with the oil and gas industries making profits. The reality is they are becoming increasingly obscene. One of the most explicit examples of this largesse, which is unbelievably unfair to ordinary purchasing consumers, is the example of Lee Raymond, the retired CEO of Exxon. He recently received $400 million in compensation for his retirement. This is unacceptable. It plays on the market and affects the price of the product because the revenues have to come from somewhere. Therefore, they come from the ordinary people in countries such as Canada and the United States, who have to pay extraordinary prices.
Again, going back to market intervention, it is interesting to note that Canada and the United States have different provincial or state governments that have taken some action on this issue. For example, Hawaii has been outspoken and critical. It has been threatened by the oil cartels about its supply, which it sees as unfair intervention. Hawaii has spoken out against that.
I know the governor of Michigan expressed concern about the recent fleecing of Americans, which occurred during hurricane Katrina. This has led to an investigation in the United States. We know this from testimony at the industry committee. Industry itself admitted that its profit margin from Katrina was spectacular. That was the terminology it used to explain its profit margin off the backs of individuals who suffered during a tragic situation.
We know these situations take place on a regular basis in terms of the market. We have heard everything in the past before, from cold weather in the northeastern United States to disruptions in Venezuela and Nigeria, a whole series of different excuses, some of which do not even take place at the end of the day. All these drum up the price of the product and we see the repercussions to consumers. The government allows a system to stay in place that does not do anything.
It is important to note that significant things are happening out there that affect this product and its price, and there is market intervention. I would argue one of the most obvious ones is the fact that the U.S. has strategic petroleum reserve. The price of crude oil and gasoline and Canadian exports are under this act and are influenced by it. The act was put in place in 1975. It allows the President of the United States to use market intervention by releasing reserves. The U.S. has barrels of oil ready to go on the market. Recently it did the same thing related to the increase in price. It has specific mandates when the oil can be released, including price.
I would like to read for members elements from the act about when the U.S. can actually use drawdowns. Once again, this allows the president of the United States to intervene in the free market. All those who have the free market mentality need to understand that those interventions are available.
First, an intervention can occur when “an emergency situation exists and there is a significant reduction in supply which is of significant scope and duration”. Second, an intervention can occur if “a severe increase in the price of petroleum products has resulted from such emergency situations”. Third, it can occur when “such price increase is likely to cause a major adverse impact on the national economy”.
The United States recently drew down from these reserves again. It is obvious that the United States federal government position is that the president of the United States directly can intervene in the market, on what we export to the U.S.
Interestingly enough, as we became part of NAFTA, much of the information I have received by way of reports and through questioning is that many countries have dual pricing. Some are OPEC countries and some are South American countries. They use dual pricing as an economic incentive to attract investment. A lot of developing nations do this as well when their resources are exploited. As an incentive, they lower the prices on their domestic market to attract manufacturing and development. China is another example of this.
What is happening here is that Canada is locked into a system. Under NAFTA we have been told that we need to restrict supply for ourselves before we restrict the supply to the United States or another market. Other countries with the dual pricing system have had questions about it raised by the WTO, but they are actually progressing with this. A discussion is going to be held sometime in the future about a subsidy. The reality is that many nations are doing this right now.
My point is that market intervention is actually happening. That is why we believe there has to be greater accountability in this matter. I think that is why some provinces have addressed this issue as well. They have systems in place for checks and balances on pricing, on the east coast in particular, with agencies that have involvement in the pricing of petroleum and gasoline in their communities. I believe New Brunswick is the latest province to do this. The Conservative government in New Brunswick has created a system whereby they have market intervention because the cost of the commodity has become so difficult for people to deal with.
I come from the province of Ontario, a manufacturing province. We recently heard from the Canadian Federation of Independent Business that the price of gasoline and other oil products is the number one factor that is causing them to struggle. Businesses are concerned about this. Once again, this does not take away from the fact that the industry can make some profit and be very prosperous, but at the same time, outright exploitation is unacceptable.
We can go back to the argument with regard to free market analysis. The House of Commons industry committee held hearings after hurricane Katrina. We asked why prices varied in Toronto, Vancouver, Sudbury and Windsor, Ontario, a slew of different places. The interesting testimony that came forward was that the reason for the price difference was supply and demand. If one area has a lot of supply, then a lot will be sold and the price will decrease a bit. At the same time, we heard other testimony which indicated that this would actually create a shortage and therefore the prices would increase. They argued from the same page.
It is important that the Competition Bureau be given teeth and be provided with the proper mandate to deal with this problem. All of the studies of the past do not get to the real root of the problem. It is not collusion when there is no competition, and that is the problem with this industry.