Mr. Speaker, I fully understand the concerns of my colleague and Canadians concerning the impact of rising gas prices. The rising price of gas and other basic commodities has a negative impact on the cost of living for everyone.
Canada's energy policy is based on an open market in which businesses are free to make business decisions within a regulatory framework designed to protect the current and future interests of all Canadians. We still support the theory that prices established in a free and competitive market are the best way to guide producers in their investment decisions, as well as consumers in terms of the type of energy they use and how they use it. This is how we ensure adequate supply at the most competitive possible prices.
As long as we are not facing a national emergency, the Canadian Constitution does not allow the Government of Canada to regulate energy prices. That is a provincial jurisdiction. At present, Prince Edward Island, Newfoundland, Quebec, Nova Scotia and New Brunswick have decided to regulate gas prices. Experience has shown, however, that although regulation may stabilize prices and make them less volatile, it does not necessarily lower prices.
The Competition Bureau has the authority and the responsibility to investigate any anti-competitive practice and, if necessary, to take legal action. The Competition Bureau has conducted several major investigations of collusion in the oil industry. Each time, the investigations revealed that it was impossible to prove that regular increases in the price of gas were due to a conspiracy to reduce competition in the supply of gas. On the contrary, the bureau always found that market forces such as supply and demand, as well as the increase in the price of crude oil, were the leading causes of price hikes.
The increase in the price of oil products is the direct result of the balance between supply and demand. Most refineries throughout the world are operating at almost full capacity and Canadian and American refineries have attained their sustainable level of maximum production. Demand for oil products continues to climb and the inability of refineries to maintain production rates will increase pressure on the price of oil products.
Although refineries continue to make massive investments, most of them have been made to ensure compliance with environmental regulations, leaving little room for investments to increase capacity. In the past five years, Canadian refineries have spent over $4.5 billion on upgrading their facilities in order to meet desulfuration regulations.
Until just recently, refiners' margins did not generate enough profit, even with the new increases in capacity. The steady rise in refining margins in recent months has encouraged refiners to continue investing in increasing capacity. Shell Canada, Irving Oil and Newfoundland and Labrador Refining Corporation recently presented proposals to build new refineries in Canada, and other oil companies are also looking at increasing their capacity, but it will be several years before the effects of these investments are felt.
When the balance between supply and demand is as precarious as it is right now, the markets react more quickly, even to the slightest changes in supply, and inventory levels become the warning signs of potential shortages.
While Canadian inventory levels determine the adequacy of supply in Canadian markets, it is U.S. inventory levels that drive prices across all of North America. For the last 12 weeks, U.S. gasoline stocks have been falling. Unanticipated refinery problems in the United States and other countries have reduced the supply of gasoline. In addition, U.S. gasoline supplies have been reduced by lower levels of imports from Europe. In April 2007, U.S. gasoline stocks reached their lowest level since September 2005, following hurricane Katrina. U.S. gasoline supplies are well below the five-year historical range for this time of year. Traditionally, gasoline inventories—