Pointing fingers

by John G. Smith and Julia Kuzeljevich

TORONTO, Ont. – By its very name, the Ontario Gas Prices Review Task Force wasn’t formed to look at the price of diesel. But a sharp increase in those prices in January and February forced the fuel to the fore, as the task force held its first meeting on Feb. 14.

There was little doubt that members of the panel weren’t siding with Canada’s petroleum industry.

Consumers feel gouged, and have the perception that prices rise at certain times, even if producers deny it, said task force co-chairman John O’Toole (MPP-Durham).

“Open transparent communication is absolutely critical for consumers,” he said. “Consumers want to see more advance notice of hikes, and more explanation of the cause from producers.”

Members of business groups, lobby arms, refineries and politicians sat before the panel in their formal presentations. And, in part, they were all pointing their fingers in different directions. Blame OPEC, blame the oil refineries, blame taxes, or even Mother Nature.

MP Dan McTeague, no friend of Canada’s petroleum industry, pointed his finger at those who sell the fuel.

Refineries in the U.S. are making three cents per litre, while Canadians are making as much as six cents, he said. “We’re not talking about chicken feed here.

“There hasn’t been any consideration given to the oil that comes from Canada … if we’re going to pay U.S. prices, maybe we should be charging taxes in U.S. dollars.”

Fuel prices defy the law of gravity by going up and staying up, he added.

If the provincial government wants to offer real help, it should look at lowering provincial fuel taxes, argued David Bradley, president of the Ontario Trucking Association. Ontario taxes account for a quarter of the price of a litre of diesel, he told the panel. In comparison, New York charges 2.11 cents per litre; Michigan charges 5.55 cents; Pennsylvania charges 3.17 cents; and Ohio charges 5.81 cents per litre. Even other modes of transportation see different taxes, with railways paying 4.5 cents per litre, airlines paying 2.7 cents per litre, and marine operations paying no provincial taxes at all.

The pre-tax “rack” price of diesel in Ontario has increased 147 per cent since February 1999, while it’s jumped 20 per cent in 2000 alone. “A week ago it would have been closer to 180 per cent (since last year),” Bradley said of top prices in the second week of February. “In 2000, we’ve seen the kinds of increases we haven’t seen since the Gulf War.

“This is the first time the retail price (of diesel) has jumped above the retail price of gasoline.”

Ontario may not have raised fuel taxes in recent years, he acknowledged. “It hasn’t reduced them either.”

But the province still benefits from some of the lowest ex-tax gas prices in Canada and the world, said Bob Clapp of the Canadian Petroleum Products Institute (CPPI), which represents the refiners, distributors and marketers in the petroleum industry.

With taxes, refining costs and margins aside, the cost of buying gasoline in Ontario is just under 26 cents per litre.

“We’re glad the Ontario governent is so far taking a non-interventionist policy in fuel prices,” said Clapp. “The competition is cutthroat as it is, and we feel the consumer is already well served.

“Can they not pass that on to the shippers?” Clapp asked of truckers. “Airlines have tacked on a surcharge.”

He pointed directly at the costs of crude oil when explaining the recent increases in the price of fuel.

In the past year, the cost of crude oil rose from US $11 per barrel to more than $30 at press time.

For its part, the CPPI is now publishing Fuel Fax at www.cppi.ca to explain the increases.

Other presentations, however, focused on struggling industries beyond the scope of traditional for-hire truckers.

“We have tour line bus operators who find they cannot recoup the extra $65 per tank on tickets that have already been sold,” said Judith Andrew, vice-president, Ontario of the Canadian Federation of Independent Business. “Trailer shops are reporting that independent operators are simply parking their trucks because they cannot afford to operate.

“If there was ever a time for fuel tax relief, this is it.”

Two thirds of their members in the transportation industry say fuel and diesel taxes are harmful to their businesses, she added.

Richard Donaldson, executive director of the Ontario School Bus Association, came asking if there was any promise of help through additional financing or tax breaks from the government.

“In our industry, we don’t have the luxury of imposing a surcharge,” he said. “Our members are hurting. We need action. Some of our operators are borrowing already from future income, and are hoping their buses will not break down this winter.”

The Ontario Federation of Agriculture’s Ray Baptie went so far as to question petroleum industry claims that the increases were linked to the costs of crude oil and an unexpected cold snap in the northeastern U.S.

(The industry often refers to crude oil price increases as the root cause, but says increases in recent weeks have been due more to unexpected cold weather and its drain on low heating oil stocks.)

“The cost of crude in a litre of diesel fuel has risen (in the past year) from 10 cents/litre to 26 cents/litre – a difference of 16 cents,” said Baptie. “In Ontario, the year-to-year price increase ranges between 19 and 27 cents per litre. Why is there this discrepancy between the year-to-year rise in the wholesale or retail price of diesel fuel, and the year-to-year rise in the price of crude oil?”

He added that blaming the increases on poor weather was a shallow excuse.

When farmers face a shortage in their crops, the borders are opened to fill any shortfall. Refineries should face a similar responsibility, he adds.

Ultimately, refiners find themselves in a damned-if-they-do-damned-if-they-don’t situation, Clapp said. “When prices go up we are accused of gouging,” he said. “When prices go down, we are accused of predatory pricing.”n

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