rE It’s a gas, gas, gas gas, gas, g The big oil companies are abusing their power and acing all the way to the pumps, charges a politician investigating gasoline pricing in B.C. By JEFF NAGEL MILLIONS of Canadians think they're getting hosed at the gas pumps by big oil companics, And independent - MLA Jack Weisgerber — who's part of a legislative com- mittee reviewing gasoline pricing — says all signals so far indicate they’re right. ~Weisgerber ~ and’ * two ‘Kootenay NDP MLAs serv- ing on the cammitlee. are to hand down recommenda- tions by the end of Septem- ber. But so far, Weisgerber said, he’s seen enough to become alarmed about the - level of contol exerted wilbin the gas retailing in- dustry by the major oil pro- ducers, Many communities and regions are experiencing gas prices thai are too high, he said, Fluctuations in prices oc- cur: ‘with little rhyme Or rea- 5On. And he suspects an ongo- _ing campaign by major sup- pliers to tighten their strang}chold on ihe industry by stomping mere indepen- dent gas stations out of ex- istance through price wars. “The - independents, un- branded or off-brand inde- péndents, appear to be being squeezed out of the Cana- dian market,” he says. “The — majors appear determined to marginalize those independents, who “have been price leaders in limes past,”’ .In some cases, he said, gas price wars have seen a situa- lion where major oil com- panies charge independent stalions more for the gas than the retail prices they’re selling it for in their own stations. A. private members Dill ‘seeks to make that situation illegal, Weisgerber said, ad- ding such legislation is al- ‘ready in. place. in about half the states in the U.S, -Weisgerber said major oil companies have so far blamed high prices in remote communities on a combination of transporta- tion costs and ~—smalll retailers’ need for higher “profit margins ta com- pensate for lower volume sales than urban stations. “We haven't yet had a chance to get to the bottom of why gas is so expensive in communities like Terrace and Dawson Creek where - transportation costs don’t seem tobe a major factor,” he said, He added that discussions with rural retailers so far don’t indicate they're enjoy- ing high profit margins. -“T haven't yet beard a good explanalion over the -Jast: 12 months why when crude oil dropped down to about $12 a barrel why there was absolutely no reduction of the price of gas in the northeast,” Weisgerber added. ‘'We're preity determined to gel answers to these ques- — tions.’” TERRACE resident Greg Merritt fills up at a local station. During the last gas price war, Merritt took ‘advantage of a Jow price of 39.9 cents a litre and filled up a couple of 45-gallon drums. Gas pricing is particularly important to northerners, says Weisgerber. Not only do we not have elaborate urban transit sys- tems to shuttle us around, we also rely on our cars and trucks to bridge the large distances across the north. “Motor vehicle trans- portation is pretty much the sole option for people in | communities like ours,’’ are probing is the tempera- ture at which gasoline is stored and pumped, *“Most retailers adjust their pumps to pump a litre of gas at 15 degrees Cel- sius,"’ Weisgerber _ said. “That almost always works in favour of the retailer and against the interests of the consumer, because most gas is stored at a lower tempera- ture than 15 degrees.” “What they’re doing is simply conitroll- ing the wholesale market and limiting the amount of competition from indepen- dents.” says independent MLA Jack Weisgerber, “A Jot of rural people drive considerable — dis- tances,” he says. ‘It represents a pretty sig- © nificant parl of the family budget and is therefore far more important.”” More people in the north need to drive trucks and four-wheel-drives thal are big gas consumers, he added, Another issue the MLAs “We're really = just scratching the surface of thal one,” he added. While various taxes make wp about half the price of gas, that’s not the focus of the committee’s work. “I view taxes as being tao high, but at least they’re predictable and ex- plainable,’’ Weisgerber said, ‘We're concerned about regional price seusilivily and competition and fair pricing within the market generally.” Weisgerber won't say what recommendations might emerge from the ongoing. investigation, ad- ding the commitice is still talking to various wholesales, retailers and distributors. But it’s clear he thinks the. main problem resis with the ail companies ability to squeeze independent relailers by using the retail prices at their own stations. *T don’t think for a mo- ment that we should pursue the notion of price-fixing or collusion or some sort of il- legal activity,’’ he notes. “I don't think the companies have to do that. What ihey’re doing is simply con- trolling the wholesale market and limiting the amount of competition from independents.’ “If there was a real com- pelitive market, if indepen- dents had better access to gasoline competively priced at wholesale, we would have a lot healthier markel.”’ Weisgerber compares the situalion to the sale of beer Jack Weisgerber in Canada. Big breweries, he notes, are nol allowed to buy up beer parlours and then sell only their own beer — something that happens in much of England. “We're quite happy saying to Molson and Lab- balt’s you can’t buy up pubs and hotels and have a verl- cally integrated operation,” be said. ‘‘Yet we watch with a minimal level of concern when the major oil com- panics do exactly the sarne thing.”’ Competition sets market price THE REALITY of competition is the largest factor in gasoline pricing, says a national orga- nization made up of petroleum refiners and maarketers, Discounting on prices will take place between gas stations in order to corner as much as the ar SHYS Petroleum Products Institute, market as possible, What makes up the price of a litre of gas? Gdn. avg, pump price §2.5 ¢ per litre In 1998. fore taxes and inflation were calculated into the price, the Canadian In fact, says the institute, studies show there doesn’t seem to be a lot of brand loyalty, “Research indicates consumers will switch gas- oline brands for as little as two-tenths of a cent per litre. - What happens then, says the institute, is that these slight declines will continue over a period of time as competitor stations try to outdo each other. ‘ cents alilre. ‘So when retailers find they can’t make any money and then raise the rates, the increase ’ seems lo be without reason , Says the institute. ‘ ‘The inslitute adds thal this is a cycle, destined *to be repeated when a retailer again lowers the ~ price in order to increase market share. “The price volatility of gasoline is the most - transparent example of pure price competition driven by the knowledige that the lowest price _gets consumer aftention and sales volume,” in- dicales ati institule publication. 4 : + + - Eventually, the declines can add wp lo several stituie. 1998, Taxes: 28.6¢/L Crude olft 12.8¢/L 54.5% 24.4% Refining: 2a.6¢/L 12,8 % Marketing: 4.4¢/t 4.3 % of fuel costs For those consumers who wonder why it is that gas prices secm to change in unison, the in- stitute says service stations act very quickly to respond to what their competitors are doing, “Tf one retailer lowers the price, the others tend to do the same, or risk losing market share,”’ says the instilute, -Canadian motorists travelling through (he United States often come back with stories of the cheapness of American gas compared to at home. Aad consumers sbould be wary of statements that the price of gas keeps going up, says the in- In January of this year, Statistics Canada’s Consumer Price Index showed a drop of 9.3 ‘ percentage points in the price of gasoline during The same federal agency did a study in 1997, ° showing the price of a litre of gasoline in Cana- da in 1996 was the same as it was in 1957 be- There’s a reason and it’s just one word — taxation, says the institute. A 1998 study done on behalf of the instituic noted that American state and federal taxes were 16 cents Canadian a litre. At the same time, Canadian taxes were 28.6 cents a litre. In total, all levels of Canadian taxation taking in federal, provincial and municipal levies took in more than $9 billion last year. The effect taxation has on gasoline prices is the institute. even more pronounced in other countries, says In Spain, a litre works out 10 $1.12 Canadian, in Germany it is $1.242 Canadian, in France it is $1,529 Canadian, in Italy it’s $1. 544 Cana- dian while. in Great Britain, the price is $1.769+ Canadian for a litre of gas, The Terrace Standard, Wednesday, July 21, 1999 - A5 Oil intrigue is decades old By CYRIL M, SHELFORD PREMIER DUFF PATTULLO, who was clected in 1933, was deeply concerned about the concentration of power in the hands of the giant oil companies, He even went ahead and set-up the Coal and Oil Board, which, | think, is: still-on the provincial statutes and which they.never proclaimed. ~~ He authorized drilling in the Peace River and the area north of Prince George. However, the industry and powerful ministers in Pattulla’s awn government did everything in their power to scutile his plans. - Bill Asseltine, a former Liberal member and Minister of Mines for Atlin, claimed that one engineer who wanted the project to fail and ensure a dry hole, pur- posély nioved the drilliig spot on the map by aver 30 tiles — and missed the oil patch by.a mere 23 miles. As faras I can discover, this was ihe only serious at- tempt to reduce the monopoly control by the warld oil industry, where only seven-or cight Major companies control world supply, There are other enquiries, but they all suffered the same fate —— | was Ieft tolaily frustrated and when asked by the press in 1966 what had been achieved by ‘all these reports, [-answered by saying, ‘‘All they do is to give Canadians a sense of security while getting screwed by the indusiry.”’ There is no doubt that the American authoritics take restrictive trade practices far more seriously than we do in Canada (e.g., the Americans split Standard Oil of New Jersey into three parts: New Jersey Standard Oil, Standard Oil of Ohio and Standard Oil of California). When you boil down all : the B.S. the simple answer seems to be, if the inde- pendents go under, com- petition is very limiled, because all the major com- panies follow the price leader, Service stations ticd in with the major companies normally destroys price competition. For this rea- son, I strongly recom- mended that the refineries operated by the major oit . comparies should be —_Cytil Shelford completely divorced from the service stations and also selling for the same price to all customers who would compete on an even basis. This would al icast indicate where the problem was. There has been one major change since | was in- volved in the 1960s and thal is that government laxa- tion has been greatly increased. These three areas should be looked at with care by lhe Weisgerber commiltce, which has a very limited timespan in which to undertake such a monumental task (i.c., to try and untangle world pricing systems). In the production and exploration areas of the busi- fess, you find several giants working together ina joint company. The industry is involved with thousands of companies in various ways (e.g., Standard Oil of Cali- fornia had financial control of 1,500 companics), This only slightly indicates the huge issue that the present committee will discover it has to unravel in six months time. Equalization of price at the wholesale level is not that uncommon, as we have in B.C, Hydro thanks ta Ray Williston and Ken Kiernan, It was the only way to de- velop the province as a whole, instead of only a small corner in the Lower Mainland. The real test comes after the report has becn tabled. Will the government take any action when the report comes in? So far, with all these many reports over the years, action has been nil. Now living in Victoria, Cyril Shelford, born and raised south of Burns Lake, was for years the Sociat Credit Member of the Legislative Assembly for Omineca and then for the Skeena riding, He served as the agriculture minister under two Premiers, WA.C, Bennett and Bill Bennett. Terrace’s own gas price war IT’S CALLED market share and in the world of busi- ness it involves the battle to pull in bigger numbers than your competitor, The struggle is most evident when it comes to gas companies, But it’s not something normally scen up north so it was a surprise in the fall of 1997 to sce gas prices drop here dramatically. Credit the opening of the Great Canadian Wholesale Club and its gas bar. In an effort to build business by attracting customers, the super store dropped its price of gas from the average 61,9 cents a litre in the city to 53.9 cents a litre for unleaded regular self serve gas. - Other stations, {caring a loss of their own customer bases, followed suit. But the Great Canadian Wholesale Club wasn't finished yel; it chopped another (wo cents a litre soon after, bringing it down lo 51.9 cents. For drivers with a 40-litre gas tank, in mcant $4 off for every fill up. Over the course of a year gas savings would total $208, if the driver filled up once a week. Other gas slalions followed suit, saying their profil margins were being eroded, By the eid of 1997, Ter- race’s 51.9 cents was low enough to make it among the cheapest in the country. Oaly Edmonton at 49.8 cents a litre and Calgary at 50.7 cents a litre were cheaper, according to a national survey. But there was still more to come as In January 1998 the price continued to drop — first below 50 cents and then, for a short time, to 39.9 cents a litre, Oil industry officials said the batile for market share wasu't unusual. But same were surprised the fight had been galng on for this long. ‘Everybody's eilher badly losing mancy or are bare- ly breaking even,’’ says Petrocan spokesman Rocco Ciancio, He estimated that provincial and federal taxes amount to 24 cents a litre when gas'sells for 41.9 cents a line, That leaves 17.9 cents, barely Iwo cents a lilre above the per litre price of crude oil. The price did eventually stabilize at 47.9 cents a litre for self serve unleaded: gas, staying there until this May before going back up 10 54,9. cetits. Gas slation owners said the price had to go up to reflect costs and Wo take into account a general increase in the price of crude oil, Still, the price is law compared to the 61.9 cents that was the city average until the fall of 1997.