Industry committee  You'd probably have to ask the Competition Bureau that. The Competition Bureau has on many occasions said that parallelism in pricing is not an indication of a lack of competition. It's the same as asking, why can you go around to all the retail sites and find they are the same?

Industry committee  The pump prices are not uniform in terms of the market. You can drive around Ottawa and find all kinds of different prices. So I have trouble understanding the question. If you're talking about the rack prices, I think most of the companies follow a very similar methodology. They look at what has happened to the wholesale prices, at least in eastern Canada and in New York.

Industry committee  If it were ten years ago, most of the companies might have said retail.

Industry committee  And that is what happened in the U.S. refining industry.

Industry committee  Absolutely.

Industry committee  In the integrated companies you're competing for funds versus investments in the tar sands or gas wells or oil wells. If they can get 100% write-off—The average return on capital employed in the upstream is about 30% plus. It depends on the company. If they're investing in that business at 35%, they can invest in the refining at 17%.

Industry committee  In Canada, about 100 billion litres of petroleum products are sold. So the 2.5¢ a litre says that the downstream industry, the refiners marketers, made about $2.5 billion last year. Just to put that in context, the capital spending over the last seven or eight years has been about 130% of earnings.

Industry committee  The major closure was Petro-Canada in Oakville. It's no secret that that refinery was not an attractive investment to put in the expenses required to desulphurize the gasoline. It was a smaller refinery and it just wasn't worthwhile. There are three big refinery projects right now that are being talked about.

Industry committee  It's very elastic but it's not very responsive. When we had the price shocks in the seventies, it took until about 1981 for the demand to drop. It dropped about 20% to 30% in the early eighties, but the price shock started in 1973 and 1977. So it will happen, but it takes time.

Industry committee  I could add something on that. We have an unwritten understanding with Environment Canada to harmonize our fuel specifications with those of the U.S. We had a slight difference with the sulphur. We went a little bit faster because between the two U.S. dates we had an interim measure, which threw off our availability to bring imports in from anywhere in the States.

Industry committee  We could conceivably see a disappearance of the middle grade. I don't know the exact sales of it, but it's a fairly low premium. As the prices go up, it's amazing how people are buying more and more of the regular grades. Some of the car manufacturers say that you should use premium, when technology-wise, if you do the research, it's more of a marketing ploy—because it is a premium car, it must need premium gas—as opposed to engineering saying that the combustion ratio is high enough that you actually need premium gas.

Industry committee  A number of provinces have regulated prices, and many studies have been carried out on this issue. The latest one, which was done by Gardner Pinfold in Nova Scotia, shows that maintaining price stability has cost the public and drivers in those provinces 1¢ a litre, which adds up to around $10 million.

Industry committee  I just want to mention the example of sulphur reduction in gasoline and diesel. We have invested $5 billion across the country in the whole refining network, which added 1¢ a litre to the cost of gasoline production, 2¢ a litre to distillate fuel and 3¢ to heating oil. Those are additional costs that are absorbed.

Industry committee  First of all, there are a couple of pennies in transportation costs. The short-term reality is that the product doesn't flow instantaneously across the border, but if there is a long-term differential, because the products are essentially the same, and if there's an opportunity for a U.S. refiner or a U.S. wholesaler to move product in the Canadian market and make a couple of pennies more, they will do that, at the debit of the U.S. market.