Canadians are being gouged at the gas pumps, paying in excess of 15 cents a litre more for gasoline than justified by costs and historic petroleum industry profit margins, says a report being released today by a think-tank.
The Canadian Centre for Policy Alternatives says it examined gasoline prices before and after Hurricane Katrina in the fall of 2005 and found that the rules of the game for pricing gasoline at the pump had changed overnight.
Hugh Mackenzie, an economist and researcher with the group, said there has always been an "unexplained differential" between what consumers pay at the pump and what they would be paying if the industry tied prices to costs and traditional profit margins.
"Up to the point of August 2005, what you saw was a normal pricing pattern where the unexplained price would fluctuate between the positive and negative," Mackenzie said.
"But after the fall of 2005, there's a marked change and the price differential became mostly on the positive side and grew.
"Frankly, I think in Canada there was psychological barrier of $1 a litre, and the industry probably felt there would be real consumer resistance to pushing prices beyond that. What they discovered is that the market will in fact bear going well north of $1 a litre and they took advantage."
The overcharge at the pump ranges from 15 cents a litre in Toronto to as much as 27 cents a litre in Vancouver, the report says.
Mackenzie argues that events such as Katrina and the recent disruptions at oil refineries may give producers an excuse to raise prices, but they cannot justify the hefty increases on the basis of costs.
"The crude oil that ends up in our tanks today doesn't cost one cent more to produce today than it did in 2001 when the pump price was less than 60 cents a litre," the report says.
"And the windfall for Canadian producers amounts to $1.7 million every day for every dollar the price of crude goes up."
As evidence for the claim, the report attempts to gauge the relationship between crude oil prices and gasoline prices at the pump. At current exchange rates, it calculates, a $1.25 (U.S.) per barrel increase should result in an increase of one Canadian cent per litre. But in September 2005, when crude oil prices increased by $10 (U.S.) a barrel, gasoline prices more than doubled, and at one point increased fivefold, above what the crude oil price justified.
"I think the facts speak for themselves," he said.
Tony Macerollo of the Canadian Petroleum Products Institute, which represents major Canadian refiners, said he "categorically rejected" the argument.
While he conceded industry profit margins have increased, he said there were a number of reasons for the current high prices, including increased demand, speculation and the fact many North American oil refineries postponed upgrades in the wake of Katrina. "We may still be experiencing some catch up."
But Liberal MP Dan McTeague said the report merely confirms what most Canadians instinctively know, that oil companies are reaping profits on the backs of consumers who have no choice but to pay.
"Frankly, it doesn't matter," McTeague said. "If a group of people want to push the price of gasoline beyond what is realistic, there's no one in Canada there to stop them."
The MP says competition in the oil industry is an illusion. The four major distributors in Canada each set the price in the region they control and the others follow, he said.
"You have a classic oligopoly and it's important for Ottawa to get its collective head out of the sand because it is responsible for our flawed Competition Act."
The Competition Bureau has conducted several investigations into allegations of price collusion but has cleared the industry of wrongdoing.
McTeague, who has sought amendments to the act, said the government should also look into establishing an independent body that could monitor and analyze gasoline price increases so that Canadians will know whether they are justified.
Statoil makes a big deal with Canadian energy group
Norwegian energy group Statoil recently announced a deal to acquire Canada-based North American Oil Sands Corporation (NAOSC) for some USD two billion, Deutsche Presse-Agentur (dpa) reported.
Statoil said it would make an all-cash offer to acquire all shares of NAOSC at a price of 20 Canadian dollars (USD 17.9) per share. The Canadian company was formed in 2001 and is based in Calgary. It operates 1,110 square kilometres of oil sands leases located in the Athabasca region of Alberta, north-east of Edmonton, Statoil said in a statement.
The board of NAOSC unanimously backed the offer as did shareholders that control 69 percent of the shares.
The deal was subject to approval by competition authorities.
Statoil Chief Executive Helge Lund said the “acquisition is an important strategic move which supports our global growth ambition and increases our reserve bookings in the long term.” Lund said the deal would strengthen Statoil’s marketing position in North America.
The deposits consist of heavy oil which is a kind of crude oil that does not flow easily. Statoil noted that “heavy oil production is energy intensive and challenging in an environmental perspective,” but said it has experience from working in the Orinoco belt in Venezuela.
The fields in Venezuela are along with the Athabasca region in Canada believed to contain the world’s largest heavy oil deposits. Statoil has become a major player in the world’s petroleum market.
