Ontario task force wants refineries to stop retailing
August 1, 2000
Ontario's Gas Prices Review Task Force has submitted 14 recommendations to the federal government, looking for such things as a ban on refinery-owned retail outlets, and a call for more fuel tax money...
Ontario’s Gas Prices Review Task Force has submitted 14 recommendations to the federal government, looking for such things as a ban on refinery-owned retail outlets, and a call for more fuel tax money to be invested into highways.
The report, released on June 30 by Ontario Consumer Minister Bob Runciman, is now in the hands of federal officials who are reviewing gasoline pricing practices.
Since there’s no evidence that high taxes alone are to blame for price spikes, some of the task force recommendations are turning to more permanent solutions, such as so-called “divorcement” that would prohibit Canada’s giant petroleum refiners from operating retail gasoline outlets.
Divorcement has already been introduced in seven U.S. states, including Maine, Hawaii, Connecticut and Maryland.
Not surprisingly, the Canadian Petroleum Products Institute (CPPI), which participated in the task force from its onset and often found itself on the defense for Big Oil, doesn’t think the recommendation offer a viable solution.
“In essence, there’s nothing new in what came out of task force,” says Bill Simpkins, vice-president of CPPI. “There’s nothing restricting refiners from retailing (in this country), and there is no evidence that divorcement lowers cost.
“With divorcement, there would be the danger that refineries would close, and independents could have difficulty sourcing product.”
“Divorcement is an extreme solution. But our market should be allowed to evolve as it does in the U.S. – with the proper checks and balances,” says Manju Sekhri of the Independent Retail Gasoline Marketers Association. The group has been working to promote and preserve the presence of an independent gasoline retailer market in Canada.
For those who have worked in the independent environment, it’s a hard go at the best of times. “There’s nobody expanding in the independent market,” says John Dunstall, a fuel operations manager for Fifth Wheel Truck Stops in Milton, Ont.
But he says reports such as Ontario’s are often little more than a case of governments versus governments.
“The province says it’s a national issue, not a provincial one. I just get the impression that we’re spinning our wheels.”
Dunstall ran an independent station for a couple of years but sold it off in frustration.
“As an independent, people would ask me if I could get them the fuel any cheaper. I’d say I can’t get it any cheaper than anyone else. It wasn’t lack of business but, with small margins, two to three cents a litre, we know there’s not much money at retail. And independents have to buy at the highest wholesale cost. And then, as prices fall, they lose the margin. But the one who’s losing most is the consumer.”
Dunstall also says that, as an independent, he could not discount his prices more than 2/10 of a cent to attract customers.
“If you don’t cooperate, they’ll (the oil companies) discipline you and lower their price below your cost. The last weekend I was in business, I wanted to sell off the gas cheap, and within 12 hours the station across the street dropped its price one full cent a litre below mine. So I went across the street and asked them to cut me some slack because I just wanted to sell off my fuel and go home.”
Under Canada’s current Competition Act, any price discrimination taking place against independents would be considered a “renewable item”, but not outright illegal.
“And by the time the Competition Bureau looks at the complaint, that item will take eight months to review. Then we’re dead anyway, ” Sekhri says.
Liberal MP Dan McTeague was also involved in presentations to the Task Force on the revamping of the Competition Act, and has introduced two private member’s bills – C-402 and C-472 – to this end.
“There are four bills in total that the government is considering adopting in order to amend the whole competition system,” says McTeague.
Bill C-402 would add more anticompetitive practices to the list, to include such offences as inducing a supplier to sell only or primarily to certain customers, or selling products at below cost.
McTeague’s C-472 bill, which had a first reading in April, proposes the most significant amendments to the Competition Act. It would replace a section that deals with conspiracy, and would target such things as price-fixing, boycotting supplies and limiting production.
Individuals would also be given the power to appeal to the Tribunal of the Competition Bureau.
From a consumer point of view, the Ontario task force has also recommended a simple change to the GST, applying the tax to the wholesale price of fuel rather than the retail cost. n