YARMOUTH, WEDNESDAY, JULY 14, 2004
SELECT COMMITTEE ON PETROLEUM PRODUCT PRICING
7:00 P.M.
CHAIRMAN
Mr. William Dooks
MR. CHAIRMAN: Good evening, ladies and gentlemen. If I could have your attention, my name is Bill Dooks and I am the Chairman of the Select Committee on Petroleum Product Pricing. I would like to say on behalf of the committee that we're very pleased to be here in the Town of Yarmouth and area tonight. The reason for us being here is Resolution No. 1676, which has given us a mandate to travel throughout Nova Scotia listening to Nova Scotians on your views, your opinions. Hopefully you will inform us and give us some direction in which way to make a recommendation at the end of the hearings that we will present to the House. In the broad sense, tonight, you're able to come and to make a presentation, and explain to us why you think gas is so high or fuel is so high, make a recommendation on which way we should approach our mandate.
Also, in saying that, we have provided some support for you. We have Kim - Kim is down back there somewhere. Well, Kim just stepped out for a moment, but Kim is down back and her responsibility tonight is to assist the committee and to supply you, the audience, with information. We have a number of different forms down there. We have information on how you can write your submission, if you do not wish to make a presentation tonight, or if you would like to fax your comments in, use the e-mail or use our Web site. We have properly advertised the committee, and I think that almost everyone in Nova Scotia understands that there is a committee and that we are travelling around, and they're very welcome to come and present their viewpoint.
In saying that, at this time I would like to ask the committee members to introduce themselves to you. I would also like to say that Howard Epstein is not able to be with us tonight, and Russell MacKinnon from the Liberal caucus is, I believe, just a bit late. We will start with you.
1
[The committee members introduced themselves.]
MR. CHAIRMAN: We had to set some guidelines, of course, because of time restrictions. I would like to inform you that this report has to be finished and given to the House on August 31st. I will tell you that we're going to be a very busy committee. In saying that, we've asked you, tonight, to put your presentation forward in approximately 15 minutes, and at that time I will notify you. Then we will open up the committee for questions.
I would like to ask Jason and Alison Dickie, business owners, to come up and state your names for the record. Your time is 7:04 p.m. Yes, you can just pass that to Kim, and Kim will give it to the committee members.
MS. ALISON DICKIE: I would like to thank you for meeting with us. I'm Alison and this is Jason Dickie. We own a gas station in Digby. I'm just going to start off by saying I'm not really familiar with the competition law, very much, so if I do say something out of text, I would appreciate your letting me know.
The purpose, in my mind, is independent retailers will no longer exist without a fixed margin put in place. The battle with low margins has been ongoing for a long time. Many independent retailers are on the verge of being forced out. We need help. Oil companies are not allowing retailers to make a margin. We are under contract with Shell, currently making 1.7 cents a litre on self-serve. As you can see from the examples I attached, I gave you a breakdown of a day at our site, with the ending amount of minus-$63, that does not include power, et cetera. I've also put in how we come about with our margins. We need at least 2 cents to cover just our credit card fees, which the oil companies do make a profit on, the 2 per cent. We need another 3 cents a litre to cover our labour and our direct costs related to selling gas. Therefore, we need at least 5 cents to cover our costs.
Shell's response to low margins, the way the formula is structured right now is not going to change. This is why we have a car wash and a convenience store, that's what I was told. Prices are so high right now, nobody is buying extras. We should be thankful we are doing double the amount of volume projected, therefore making up the difference. So is this why Shell gives us low margins, because we are doing so well? We have good volumes, just not profitable ones. We have a depressed market in Digby. How can Digby be selling cheaper gas than Halifax?
Ultramar drives down the price, making us follow, making all of us follow. How can they do it, and Shell tells me that they're losing money? Wilson gives 2 cents off a litre when they pay with cash. Esso can sell their full-serve diesel cheaper than what I can buy it for, and I'm the only self-serve diesel station in Digby, and they will not listen to me whatsoever when I tell them the price in Digby is this but I am self-serve not full-serve, like everybody else. We are doing so well and have taken so much business from others. Are the oil
companies making us pay for this? Are the other oil companies making us pay? Are they keeping the prices down in Digby because of this, that we've stolen business from them?
As an independent gas station in Digby, we can't play games. If there is so much room for corporate sites to play with prices, why is there no room to pay the independent retailer margin? Esso holds down prices when they need to go up. Ultramar drives down prices, lower than Halifax, when they need to stay up. This means we'll never make a margin. That's basically all I have to say on the side of margins.
Supply is just a very little part of it. Shell dictates to us what trucking company we have to use. We had to switch over from automatic delivery to making our own orders, because they were filling up our tanks with "Gold". So when the price dropped, we were taking the loss on it. We pay for our gas two days after we receive it. So we're taking a loss for weeks and weeks. Also, along with the supply, they let us run out consistently, and Shell has no help in that whatsoever. They just say, well, things happen. I wish I could say things happen at my business and get away with it.
In conclusion, as an independent business person, half our project costs and ongoing costs are related to the petroleum side, therefore, wouldn't it make sense for us just to have built a car wash and a convenience store, if our understanding, going into this project, was not to make money off the petroleum. Not to mention, car washes and convenience stores do not have the environmental risk that fuel does. Who pays when the spills and leaks occur? Us, not Shell. Who pays for equipment when the equipment gets outdated? Us, not Shell. Who makes money? Shell, not us.
Why would the petroleum company be in business if they are not making money? After all, they are business people, too, and want a return on their investment. The government has fixed margins that will be affected if all small independent retailers go out of business. At this time I'm not worried about getting a return on my investment, I'm worried about staying alive. Trust me, this place will be open long after I can't make my bank payments. The only difference is - excuse me, Shell will be the proud owner, not Jason and I.
MR. CHAIRMAN: Thank you for your presentation. If you would like to collect yourself, we will wait for a moment. At this time the routine would be to open up the committee for questions. Are you focused for that?
MS. ALISON DICKIE: Yes.
MR. CHAIRMAN: Okay, thank you. Frank, if you would, please.
MR. FRANK CORBETT: Does Shell own the service station?
MS. ALISON DICKIE: No, we do.
MR. CORBETT: You do?
MS. ALISON DICKIE: Yes.
MR. CORBETT: When can you get out of your contract with Shell?
MS. ALISON DICKIE: Ten years, and they have the option for the next five after that.
MR. CORBETT: Basically they have the right of first refusal.
MS. ALISON DICKIE: Yes.
MR. CORBETT: So you can't get out of it, you can't just walk away from those folks?
MS. ALISON DICKIE: No.
MR. CORBETT: Would a bill inhibiting the large companies such as Shell, Esso, and so on, from underselling the rack price - would that help you?
MS. ALISON DICKIE: Maybe.
MR. CORBETT: You understand what the rack price is, right?
MS. ALISON DICKIE: Yes. We're not on rack-based pricing, and we're not going to be on rack-based pricing. That's what we've been told.
MR. CORBETT: Did they tell you why you wouldn't be on rack-based pricing?
MS. ALISON DICKIE: No. They just have some kind of formula and nobody knows how that formula is derived.
MR. CORBETT: Nobody knows?
MR. JASON DICKIE: They won't tell us how it is.
MS. ALISON DICKIE: No.
MR. CORBETT: And you can't go out and take . . .
MS. ALISON DICKIE: I can't go look at crude oil and . . .
MR. JASON DICKIE: . . . decide where the price should be.
MR. CORBETT: Yes, like rack-pricing comes in and they say, okay, this is what the spot market has . . .
MR. JASON DICKIE: They can change our price twice a day. We call . . .
MS. ALISON DICKIE: We call in to our territory manager, and we tell her where our price is, and she will adjust it . . .
MR. JASON DICKIE: . . . to the market.
MR. CORBETT: Have you ever done a costing on, say - they're telling you who has to truck your product in to your station. Is that correct?
MS. ALISON DICKIE: Right. Yes.
MR. CORBETT: So have you ever done a comparison - X company is doing your trucking, so you call Y company and say how much would it cost you to ship . . .
MS. ALISON DICKIE: We've never done that, but I know that there was somebody in the position that was looking at this site to purchase it, he was with Sawler Fuels and he said that the only way he would do the site is if he could truck it, and they refused him. Obviously, for him to truck it himself would be a lot less cost than what it is for them dictating the trucking company, but I have never done a comparison, no.
MR. CORBETT: As we all know, it's basically Esso gas we use here.
MS. ALISON DICKIE: Yes.
MR. CORBETT: So you have no freedom to say who the trucker is and you can't set your own price - can you set your price?
MS. ALISON DICKIE: We can set our own price, but . . .
MR. JASON DICKIE: First we have to follow the competition.
MS. ALISON DICKIE: You have to follow the competition.
MR. CORBETT: Yes, that's right. If you look down the road and they are selling it for 89 cents a litre, you're not getting anybody to stop by at 95 cents a litre.
MS. ALISON DICKIE: Just like today.
MR. JASON DICKIE: We put it up today, and we were the only ones up and our pumps were dead for . . .
MS. ALISON DICKIE: We were at 86.9 for the last week, and Halifax and other areas have been 89.9.
MR. CORBETT: Just a couple of small, quick questions, Mr. Chairman. Are you all self-service or do you have . . .
MS. ALISON DICKIE: We are all self-service. We would consider full-serve, but not with the margins that we have. I can't afford employees right now.
MR. CORBETT: And if everyone pays by credit cards, you're almost guaranteed to lose. Is that correct?
MS. ALISON DICKIE: We lose. Tourists, we're looking for tourists . . .
MR. JASON DICKIE: They all use credit cards.
MS. ALISON DICKIE: They all use credit cards, and I lose every time they swipe their card. It's a hard life.
[7:15 p.m.]
MR. CORBETT: I'm smiling, but I'm not grinning.
MS. ALISON DICKIE: No, I know. I understand.
MR. CORBETT: It's the perplexity of it.
MS. ALISON DICKIE: It seems pointless, does it not?
MR. CORBETT: But I bet you Shell is making money.
MS. ALISON DICKIE: Oh, I'm sure they are.
MR. CORBETT: Thanks a lot . . .
MS. ALISON DICKIE: They will let you know that they are not.
MR. CORBETT: We appreciate you coming here.
MS. ALISON DICKIE: Thank you.
MR. CHAIRMAN: Thank you, Frank. At this time I would like to recognize Brooke Taylor.
MR. BROOKE TAYLOR: Mr. Chairman, I would like to thank the Dickies, especially Alison for her presentation. Alison, who do you normally buy your petroleum products from, who is the wholesaler?
MS. ALISON DICKIE: Shell - we buy it from Shell.
MR. TAYLOR: You buy it from Shell?
MS. ALISON DICKIE: Yes.
MR. TAYLOR: And what trucking company is delivering the product?
MS. ALISON DICKIE: Coastal.
MR. TAYLOR: Coastal is delivering the product. I've been told by a couple of independents - and I used to be in the trucking industry for a number of years - that they would like to see the playing field levelled in that independents in this province be charged the same price, save for perhaps 2 cents, relative to transportation costs. What independents have told me is exactly what you have during your presentation, that the price of diesel for example - and I have an invoice here from an independent that clearly delineates that the price of diesel oil to that independent is 73.14 cents, and yet you can go to Wilson Fuel Company, some of their outlets, and buy it for 72.9 cents.
So, in fact, before we can, I believe, before the consumers, the motorists and the truckers out there can have a lot of confidence that they're paying a fair price at the pump, the independents have to have a level playing field.
MS. ALISON DICKIE: Our prices in Digby, for diesel, there are four set prices, four different prices.
MR. TAYLOR: There are four different prices?
MS. ALISON DICKIE: Yes, and I can't go anywhere near the lowest because I am just literally buying it for the lowest price.
MR. TAYLOR: Pardon the expression - are you tied to, if you will, Shell? You can't buy from Wilson Fuel Company?
MS. ALISON DICKIE: No, we have to . . .
MR. TAYLOR: You have to buy from Shell?
MS. ALISON DICKIE: We have to.
MR. TAYLOR: And Shell is licensed to purchase that fuel from the refinery . . .
MS. ALISON DICKIE: Yes.
MR. TAYLOR: In Dartmouth, Esso . . .
MS. ALISON DICKIE: Yes.
MR. TAYLOR: I think we were told, Mr. Chairman, 90 per cent of the gasoline diesel products in this province are generated at Esso.
MS. ALISON DICKIE: Yes.
MR. TAYLOR: In fact, it seems to be the wholesalers - I'm not picking on the wholesalers - in Nova Scotia have liberty to charge what they like to the independents; consequently the field is quite . . .
MS. ALISON DICKIE: Obviously they're not in the same boat. Whoever is selling it for 77.9 cents is obviously making a margin.
MR. TAYLOR: Even independents - and I think in Nova Scotia, since Wilson's took over about 116 Esso stations, most of the operators are independent, are they not, to your knowledge?
MS. ALISON DICKIE: I think so. I'm not sure. Independent, yes.
MR. TAYLOR: I don't believe there are too many integrated . . .
MS. ALISON DICKIE: No, I don't think so.
MR. TAYLOR: . . . that are refiner/retailer operations. Again, Mr. Chairman, I want to emphasize that a concern independents have is that the playing field isn't level, wholesalers are charging different prices to different independents, and consequently they have to reflect that price, and unless you own a convenience store or have some other little niche - or maybe a big niche - you can't make a living just selling fuel in this province.
MS. ALISON DICKIE: No, we've been told that we're not supposed to make money off gas.
MR. CHAIRMAN: At this time I would like to introduce Mr. Russell MacKinnon. It's nice to have you with us this evening, long trip.
Mr. Jim DeWolfe.
MR. JAMES DEWOLFE: Thank you very much for your presentation. You made it quite clear as to the dilemma you're in, and you provided us with some information that clearly explains the situation. I just rooted out of my billfold a receipt from my community when I filled up last evening with diesel, and it was 76.9. That's probably less than you can buy it for. They were selling the regular self-serve at 87.9 yesterday. I understand that it has gone up today, but I don't know how much.
MR. JASON DICKIE: Diesel hasn't moved.
MR. DEWOLFE: Diesel hasn't moved. Anyway, having explained to us the situation that you find yourselves in, I'm just wondering if you had some thoughts when you came here tonight on what we, as a government and as a Legislature, might do to help your needs. Have you any suggestions to make that we could take back to our government that might help your situation?
MR. JASON DICKIE: A straight 5-cent margin to us, regardless of what the price is. If we make a straight 5cents a litre.
MS. ALISON DICKIE: Somehow we need 5 cents.
MR. DEWOLFE: You need a 5-cent margin?
MS. ALISON DICKIE: Yes.
MR. DEWOLFE: I have no more questions, Mr. Chairman. Thank you very much. Again, I feel sorry for the situation you're in and you have to be there for a good number of years yet under the current arrangement.
MR. CHAIRMAN: Thank you, Jim. At this time I'd like to recognize Stephen McNeil.
MR. STEPHEN MCNEIL: Thank you to both of you for coming in and doing your presentation. I know it's difficult to come forward in a group of people who are strangers and lay your business situation on the line. Many of the questions have been asked, but I would just like to ask one around being an independent in a contract with Shell. They set the price, they tell you who delivers . . .
MS. ALISON DICKIE: They don't set the price - well, technically . . .
MR. JASON DICKIE: We set our price.
MR. MCNEIL: Is the contract that you have with Shell a standard contract for independents with Shell, do you know? Have you spoken with other Shell independents?
MR. JASON DICKIE: It's the same.
MS. ALISON DICKIE: Yes, pricing is the same. It all depends on the site, how old it is - it really does depend on the site. Some people who have been in the business for a longer time probably do make a 5-cent margin. But if they're making 5 cents, they might be getting hit in their credit card fees. Companies do different things to present it to different people.
MR. MCNEIL: Would Shell, depending on which independent they were dealing with, have a standard contract?
MS. ALISON DICKIE: I'm not sure.
MR. JASON DICKIE: We're not real sure on that.
MS. ALISON DICKIE: Other companies, I know for sure. Everybody's different. It all depends on your situation.
MR. MCNEIL: Thanks.
MR. CHAIRMAN: Thank you, Stephen. I recognize Gerald Sampson.
MR. GERALD SAMPSON: Thank you for a rather heart-rending human story which doesn't seem to resonate very well with the big companies.
Before I ask you a question, is there anyone here tonight representing the gas companies? (Interruptions) Okay. Would you be willing to take a few questions later after the presenters? (Interruption)
MR. CHAIRMAN: Member, you would have to ask that through the Chairman and the Chairman would have to advise the gentlemen that if they would like to make a presentation, they would have to schedule their presentation with Kim at the back of the room. Your question is in line, but I would just ask you to ask it through the Chairman. Thank you.
MR. GERALD SAMPSON: And to Alison and Jason, you said somebody was selling for 77.9 cents. Was that an independent station or was that a . . .
MS. ALISON DICKIE: It's independent.
MR. GERALD SAMPSON: That was an independent station. Similar to you?
MS. ALISON DICKIE: Yes, but they are full-serve and we are self-serve.
MR. GERALD SAMPSON: The difference between full-serve and self-serve, if they're full-serve they're making a little bit more but they're paying wages, so where's the discrepancy? You're saving on the wages end of it by having a self-serve.
MS. ALISON DICKIE: My price is 80.9 cents and I'm self-serve.
MR. JASON DICKIE: We should be able to sell it cheaper.
MS. ALISON DICKIE: I should be able to be at least 75.9 cents. I should be cheaper, not more.
MR. JASON DICKIE: Full-serve prices are always higher.
MS. ALISON DICKIE: So he's paying a wage and able to sell it cheaper.
MR. GERALD SAMPSON: I don't understand. I just filled up at a Shell station and I think I paid 93.9 cents or something, just up the street here. Okay. I just wanted to try to get it straight in my mind.
The final question that I have for you is, if somebody is getting their 5 cents a litre, it's your understanding that they could be getting charged more or less on the credit card end of it? If it were me and I was getting the credit card, say VISA, at a 3 per cent charge, they may ding them for 4 cents and the gas company itself has a deal, say with VISA, that they get a cut?
MS. ALISON DICKIE: Yes.
MR. GERALD SAMPSON: Okay. You have my sympathy. I'll just finish my remarks, Mr. Chairman. I don't think there's any blood or any heart in greed, it seems to know no boundaries. Thank you.
MR. CHAIRMAN: Thank you, Gerald. I'd just like to inform committee members in the audience that the gentlemen representing the industry had made their presence known and also had sent a letter to the committee last week stating that they will make a presentation, I believe in Halifax. So they're going to follow the committee around, getting a feel for what people are saying and in conclusion, they will make a presentation in Halifax. I just wanted to make that clear.
At this time I would like to recognize Russell MacKinnon.
MR. RUSSELL MACKINNON: Thank you, Mr. Chairman. Just briefly to our witnesses, they purchase their fuel from Shell, correct?
MS. ALISON DICKIE: Yes.
MR. MACKINNON: Do you have any indication or any idea as to where Shell acquires its fuel supply?
MS. ALISON DICKIE: They get it from Esso.
MR. MACKINNON: So the point is, it's not a Shell product, it's an Esso product.
MS. ALISON DICKIE: Correct.
MR. MACKINNON: Do you have any indication or any idea as to what the terms of the arrangement are? I'm thinking in terms of pricing, like subcontracting, that sort of thing. So you have no indication?
MR. JASON DICKIE: No.
MR. MACKINNON: Okay, thank you.
MR. CHAIRMAN: Thank you, Russell. I'd like to recognize Charlie Parker.
MR. CHARLES PARKER: Thank you, Mr. Chairman. I sympathize with your situation, folks, and I know it's probably something we're going to hear about throughout our hearings as we travel around the province. Coming from Pictou County, I've heard it from a number of retailers over the years, whether it's self-serve or full-serve, whether they lease or own the station - that it's tough being a retailer in gasoline. I guess part of the reasoning behind it is maybe there are other opportunities that you have for making money, I guess. That's probably why you're in business, I would suspect, but in your case you have a convenience store and a car wash. You're not into mechanical, or is that an option for you at all? It's not your thing.
MS. ALISON DICKIE: No.
MR. PARKER: Okay. On the other side of it though, on your convenience store and on your car wash, are you making enough to make up for your losses on the gasoline?
MR. JASON DICKIE: We're able to stay open for now. If this trend continues, it's going to be real tough.
MS. ALISON DICKIE: I didn't spend that amount of money on gas on the presumption that I was not going to make a margin off my gas. I would not have put it in.
MR. PARKER: So, if you had to do it over again, you wouldn't be in the gasoline retailing?
MR. JASON DICKIE: Convenience store and car wash only. Our payments would be half as much.
MR. PARKER: Okay. Now, when you started out in the business, did you have to pay a franchise fee or was there any cost to get in as far as being a Shell retailer? Or for the convenience store and car wash, was there any cost to get into that?
MS. ALISON DICKIE: There's a big cost to . . .
MR. PARKER: Well, the cost of setting up business, but no franchise fee or no royalty structure?
MS. ALISON DICKIE: No.
MR. PARKER: How long is it before your contract is over? You said it was a 10-year contract.
MR. JASON DICKIE: It's 10 years with their option of five, for a total of 15.
MR. PARKER: How far are you into it?
MS. ALISON DICKIE: One and a half years.
MR. PARKER: So you have eight and a half years, possibly thirteen and a half.
MS. ALISON DICKIE: I would say thirteen and a half.
MR. JASON DICKIE: They're not going to pass it up for their option of five, guaranteed.
MR. PARKER: One final question, Mr. Chairman. Is there a penalty for you if you decide you're up against the wall and you have to get out? What are the consequences?
MS. ALISON DICKIE: They get to buy in.
MR. PARKER: I see. Okay, thank you.
MR. CHAIRMAN: Thank you, Charlie. I would ask you if you have any closing comments.
MS. ALISON DICKIE: No. I would just like to thank you all for hearing what we had to say and hope things can change.
MR. CHAIRMAN: Jason and Alison, we thank you for your presentation tonight. You did an excellent job, I must say. Thank you very kindly.
MS. ALISON DICKIE: Thank you.
MR. CHAIRMAN: At this time, I would like to call on Malcolm Madden. While I'm waiting for Malcolm, I would just like to state to the audience tonight that this is a public session and your comments are being recorded. If you would like to make a presentation and you haven't booked in, once again, Kim is the assistant to the committee and she's at the rear. You would just notify her and we'll listen to your presentation as well.
Malcolm, we'd ask you to do your presentation. I don't know if you were in the room earlier, but you have 15 minutes, sir, to make your presentation and then we're going to open the committee up for questions if you so choose. You can carry on.
[7:30 p.m.]
MR. MALCOLM MADDEN: Thank you, Mr. Chairman, members. My name is Malcolm Madden and I have a retail outlet on the outskirts of Yarmouth. I have been a gasoline retailer since 1979. The business that I am operating was started by my grandfather in 1929. It has endured different hardships over the years: in 1951it was completely destroyed by fire; in 1981 it was an environmental disaster; through the years geographical changes, such as highway construction. But since the 1990s, we have a different battle - competing with our own suppliers.
The government of the day at that time was convinced by the oil companies that we did not need regulation and that consumers would benefit price-wise. Well, if the consumer did benefit, it was at the expense of the retailers. We have seen our margins drop per litre and my customer base dwindle as the oil company-operated stations or outlets lower prices to entice more volume.
Gentlemen, I am not stupid enough to take on a giant oil company. Regulation may not be the way to go, but I strongly believe that some protection should be put in place for the dealers that do remain. This protection could be in the form of a guaranteed price margin, much like the protection that the dealers in P.E.I. enjoy at this time. This system seems to work fine in that province. I also don't believe that I should be forced to compete with wholesalers that naturally have a price advantage - there's no fairness there.
Through the years I've been involved with the retail gasoline association. I started 16 years ago as president of the Yarmouth County division and ended up being president in Nova Scotia and now past-president for three years. In those years I saw more than a few good retailers leave the industry, most of them with financial nightmares. At one time there were over 1,000 retailers and now a little over 400. It doesn't take an economist to figure out how many jobs went with those outlets.
In closing, I will give you an idea of what I'm presently making on a litre of gasoline. This week, my cost on a litre of gasoline is 0.87709 cents a litre. Because of competition and company-operated outlets, the price I have to sell it for is 0.899 cents a litre. Now, I'll do the
calculation - that would be 0.02191 cents per litre. If you paid me with a credit card - in which I lose 2 per cent - I'm now making 0.00393 cents per litre. I've heard about loss leaders before, but this is supposed to be our main means of revenue.
I'm hoping this committee is here to help the industry and to do something about the situation. I'm including a copy of my pricing for July 9th to July 16th in the presentation.
Just a few notes. As I came in, I had a message from a dealer who was supposed to make a presentation, but he had a crisis and couldn't make it here. He asked me to talk about the card locks in Nova Scotia, which have an unfair advantage over retail gasoline dealers. They go under different rules. Another problem with them is if the price does go up, as their profit goes up, the oil companies just snatch it the next day. That's about it, thank you.
MR. CHAIRMAN: I would just recognize Jim DeWolfe for clarification.
MR. DEWOLFE: Just for clarification, you mentioned the car lots - what did you mean by that?
MR. MADDEN: I'm sorry. Card locks.
MR. DEWOLFE: Oh, card locks. Sorry. (Interruptions) I misunderstood. I understand, I just didn't hear right. Thank you.
MR. CHAIRMAN: Thank you for the clarification. At this time I'd like to recognize Russell MacKinnon.
MR. MACKINNON: Mr. Chairman, I was a little bit interested in our witness' observation with regard to regulation versus deregulation. I don't know if I had the fortune or misfortune of sitting in on the Law Amendments Committee back in 1991 when deregulation took place. The commitment of the government of the day at that time was that the price of fuel would go down in Nova Scotia. At that time it was 46.5 cents, as I recall; on average, now it's 93.9 cents, a difference of 47.4 cents a litre.
I realize there are a lot of factors in that; however, another issue was the fact that we would be providing greater service to the people of Nova Scotia. Since that time, the number of service stations has declined quite dramatically as I understand, particularly with self-serve, because people can't drive into their service station and get a wiper fixed, they can't get their oil checked, they can't get a signal light fixed, that sort of thing. Particularly if they're not very mechanically inclined, that type of service seems to be evaporating, but yet, profits seem to be going up.
You indicated that if the benefit is there, it must be to the consumer and not to the retailer. Many consumers would argue quite to the contrary that it's not to their benefit. I want to be clear in knowing what your view is on regulation versus deregulation.
MR. MADDEN: How much time do I have?
MR. MACKINNON: The Reader's Digest version.
MR. MADDEN: I don't know if there's a magic answer to that or if there is a short answer to that. I was there with regulation and number one, I guess consistency was one thing that comes to mind. I did not mention in my report about the changing price of gasoline on, if not a weekly, a monthly basis. In the time of regulation, there was none of that. We had to go in front of a board and ask for a 2-cent raise - now you can, overnight, go up 5 cents. That's one thing that I noticed with regulation, there was consistency in prices.
I find it very difficult that I have to go up against a huge oil company to try to survive in the gas business. Regulation, there was none of that. It was always just retailers buying from the wholesalers. We fought amongst ourselves, not against somebody in Calgary. Those two points there are major.
MR. MACKINNON: The profit margin since deregulation, has it declined on a per litre basis?
MR. MADDEN: Per litre basis, for a long time after deregulation, it stayed pretty good. It was basically around the same place. All of a sudden, I don't know why, I'm not 100 per cent sure, but when I saw oil companies coming in and opening up their own sites, that's when we saw a difference in the margins. I can't tell you exactly when that started, it wasn't right at first.
MR. MACKINNON: One final question, if I may. My understanding is that 90 per cent of all the fuel that's sold in Nova Scotia is refined at the oil refinery in Dartmouth, the Esso oil refinery - at least that's what we were advised at the last committee meeting.
MR. MADDEN: There's also Irving, they used to bring in their own.
MR. MACKINNON: That's right, but even at that, much of the gas that's sold at Irving stations in Nova Scotia is refined at the Esso refinery in Dartmouth.
MR. MADDEN: Could be.
MR. MACKINNON: Am I correct?
MR. CHAIRMAN: That's correct. We were briefed.
MR. MACKINNON: I'm always a little perplexed as to why the price of gasoline is effectively the same at service stations, whether all the different companies. Now, I'm not alluding to the fact that perhaps there's some price fixing going on, but I'm always amazed at why the competition seems to be not as pronounced as it is in other sectors of the economy. Do you have any thoughts on that? It may be an unfair question, but it's just a personal observation.
MR. MADDEN: Yes, it's such a competitive consumer product. I don't know why, but consumers probably watch pricing more than I do. If I go to Halifax, I will go by 10 stations and somebody will ask me what the prices were and, oh, gee, I never looked, but consumers come into my place and if I'm one-half a cent off, they'll tell me. So consumer driven, as soon as he tells me I'm half a cent off, boom, I've got to match it or else he's gone. Now, is it wise on my part? Well, let me tell you, if over the years I haven't done it, my customer base is gone. So now if the guy next door is down to 90 cents a litre and I'm at 91 cents, I'm there. So that's why you see the same price all over. I'm not sure if that was the answer you're looking for.
MR. MACKINNON: One final on that, Mr. Chairman. As you know, the price of gasoline and oil irrespective of whether it's diesel, domestic, home heating, or whatever, that's an international issue. We, as a province, are a small province in a large country. What effectively do you think that we as a committee and as legislators can do to help reduce the price of gasoline or home heating fuel, or whatever the petroleum product is, in Nova Scotia?
MR. MADDEN: My opinion, unfortunately, I don't think you have a whole lot that you can dictate on a world market as far as prices although you are capable of helping out the retailers. I'm not saying the prices will be lower, I'm saying that at least we'll have a fair game at this product.
MR. CHAIRMAN: At this time I recognize Brooke Taylor.
MR. TAYLOR: Thank you, Mr. Chairman, and thank you, Mr. Madden, for your presentation. Can I ask you, who do you purchase your petroleum products from?
MR. MADDEN: I purchase it from Wilson Fuel.
MR. TAYLOR: Do you know how many service stations Wilson's is responsible for, or at least has an interest in, in the province?
MR. MADDEN: No, I don't.
MR. TAYLOR: I don't either, but I have heard that they have purchased, or at least one of their last purchases was some 116 former Esso service stations in the province.
MR. MADDEN: They acquired the rights to sell fuel because most of them are independent dealers who are now, they were independent Esso dealers who are now supplied by Wilson's. So they couldn't have purchased the outlets, and I could be wrong there, maybe they did purchase 116 and other retailers are there.
MR. TAYLOR: I'm not clear on that either, but I do know that, for example, the former Wilson's station in Elmsdale now has a big Esso banner that is flying very highly over that establishment and I've been told by independents such as yourself, and maybe you might share your thoughts with us, what do you think of volume discounts? I've been told that because Wilson's purchases millions and millions of litres from Esso that they receive a discount as a wholesaler and consequently can sell to the retailer, be at their own station, or to you or to somebody in Sherbrooke or Upper Musquodoboit, for a price that is, by some people's description, predatory.
MR. MADDEN: I really can't answer that but, yes, I have to go by my own experience, the company-owned station, and I might as well say the Ultramar that I have to compete with has lower prices at times and I have to call Wilson's and beg for a better deal or else just take the lump or lose the sale. So if that's the case, then Wilson's is not passing it on if they do get a discount.
MR. TAYLOR: Yes, and that's a concern, Mr. Chairman, that a number of independents have expressed. I have a copy of the Ontario Gas Price Review Task Force Report entitled Fairness at the Pump. It's dated June 29, 2000. You referenced a little earlier the Prince Edward Island scenario and in Prince Edward Island not only is wholesale regulated, so is retail, and the retailers are guaranteed a margin. However, they cannot be 1.5 cents greater or lesser than any other retailer across the island. So you might be guaranteed 4 cents or 5 cents.
I don't know what the guarantee is but, as well, the wholesale price would dictate the retail price with each retailer maintaining a 1.5 cent range of discretion in setting the price at the pump and it further states that Charlottetown has perhaps the consistently highest exempt tax pump price, meaning that they have the highest price without the flat taxes on your provincial excise tax added of any urban market in Canada but, despite this, over the last year gasoline prices in P.E.I., now this is dated as I indicated in 2000, despite the trend over the last year gasoline prices in P.E.I. have been lower than the national average. I can't speak for any given community in Nova Scotia, but I'm wondering if you feel there is some value in regulating, like I don't know what you call it, partial regulation, but regulating the wholesale aspect for the retailer?
[7:45 p.m.]
MR. MADDEN: I like to use the word protection rather than regulation because regulation doesn't seem to want to be back, but that is a protection that the retailers in P.E.I. enjoy and it seems to be working because there is no price discrepancy except for maybe that 1.5 cents and it could be in a rural market rather than urban which sometimes makes a little sense because of the delivery and targets and, again, delivery is another whole issue that I can't explain.
MR. TAYLOR: According to this document, Mr. Chairman, as you probably know, the wholesalers on Prince Edward Island can only apply to the Island Regulatory and Appeal Commission six times a year and the application has to be related solely to the price of crude oil. Maybe I'm not as objective as others, but I think it puts some fairness into the equation, not only for the retailer, but for the motorist and trucker out there who has to purchase the commodity. I'll leave it at that.
MR. MADDEN: That was in 2000?
MR. TAYLOR: This is dated June 29, 2000. It was presented to the Hon. R.W. Runciman, the Minister of Consumer and Commercial Relations in Ontario, and of course that government has changed colours now but, nonetheless, it indicates that there was a lot of research done and they compared all the provinces across this country as to what they're doing.
MR. MADDEN: Yes, and it's four years now and it's still in place. So it seems to be working.
MR. CHAIRMAN: At this time I would like to recognize Frank Corbett.
MR. CORBETT: Mr. Chairman, before I begin my questioning, maybe the member could table that document as he used it and we could all enjoy reading it.
MR. TAYLOR: If I could, on a point of order, Mr. Chairman. I was provided with that document as other members were at the most recent briefing of the all-Party committee.
MR. CORBETT: So it's there.
MR. TAYLOR: But you can have my copy later on for bedtime reading.
MR. CORBETT: Only if you will sign it.
MR. TAYLOR: I'm one of those fools who reads through that stuff.
MR. CORBETT: Well, just one thing, I guess when we talk about deregulation and to read through, Mr. MacKinnon might have been perplexed, he voted for Bill No. 138. (Interruption) Mr. Madden, your service station, did you say you owned it?
MR. MADDEN: Yes, I do.
MR. CORBETT: You own it and what insignia is out in front of it?
MR. MADDEN: Wilson Fuels.
MR. CORBETT: It's a Wilson Fuels with Wilson signage on it?
MR. MADDEN: Yes.
MR. CORBETT: And you said you had, one was a fire and the other was an environmental?
MR. MADDEN: Yes.
MR. CORBETT: And was that a spill?
MR. MADDEN: Tank leakage.
MR. CORBETT: Tank leakage. I assume that has been repaired and you're back in business obviously?
MR. MADDEN: Yes, a couple of houses have been moved.
MR. CORBETT: Who took on responsibility for the repair? Was it insurance?
MR. MADDEN: The insurance ended up taking the brunt of it.
MR. CORBETT: Taking the brunt of it?
MR. MADDEN: Yes.
MR. CORBETT: Now, on the pricing side, and you say you call Wilson's and say look, the Ultramar down the street, I'm at 99 and they're at 98, and unless you give me a break everyone is going to drive by my pump today. You say you have to beg them - what is usually the result of that? Do they succumb to your pressure or what do they say?
MR. MADDEN: It has come to my belief that if I'm making 1 cent to 2 cents a litre, I better keep quiet because I'm not going to get any more, but I also talk to other dealers and find out that this is what they're making anyhow. So, you know, I'm not one of those who expect more than others.
MR. CORBETT: So they usually don't give you a break?
MR. MADDEN: No.
MR. CORBETT: None at all, and that's even factoring in the fact that you may even be actually losing money on credit card sales and so on?
MR. MADDEN: Yes.
MR. CORBETT: Now the consumers ask us why gas prices go up overnight. The rack price may have been say 92 cents, but overnight it goes up to 95 cents. Now you bought it at 92 cents and it has gone up. Why don't oil companies wait until that supply is depleted? How does that work?
MR. MADDEN: Well, I can't answer that for the oil companies but, for myself, if I've purchased gasoline at 90 cents and it has gone up to 95 cents, if I don't put my product price up now, when I purchase my next tank it's costing me 5 cents a litre more. I don't have the money to buy it if I didn't put the price up in the first . . .
MR. CORBETT: So it's hedging against your next purchase?
MR. MADDEN: Right, the same as when the price goes down. I don't sell my load at 95 cents when the price went down because I won't sell it for a long time, but I can afford to put it down because my next load is going to be a lower price, so one comes to the other.
MR. CORBETT: So you're assuming, hopefully, that it balances?
MR. MADDEN: I don't try to analyze this anymore because it's a nightmare.
MR. CORBETT: Yes. Mr. MacKinnon asked you earlier about, you know we live in a global economy and there's not much we can do about the wellhead in Saudi Arabia, but we can certainly do something when we eyeball the customer in Yarmouth. When you sell gas and like most retailers, you have that pie chart close to your pump, how much does tax affect your sale? Is there movement in your estimation that if the tax burden was less, you could sell at a more reasonable price?
MR. MADDEN: If I may be honest, if the tax was dropped somewhere, I think the oil company would take advantage of it.
MR. CORBETT: So you think there would be a clawback there?
MR. MADDEN: This is my opinion.
MR. CORBETT: I appreciate your honesty, thank you, that's it.
MR. GERALD SAMPSON: Mr. Chairman, probably just a little bit of information that was given to the committee in the briefing at our last meeting, and it may dispel some of your enthusiasm for regulation. From the figures we were given - and the members here can correct me if I'm wrong - the 2003 overall picture for P.E.I., and one problem with regulation is that when the price goes up it takes two to three weeks for the price to rise and when the price goes down, it takes two to three weeks for the price to come back down again. What it does is it gives stability in the marketplace for the consumer, so you don't have all these spikes that we have in our pricing here in Nova Scotia, and their final conclusion stated that as a result, using the 2003 figures, the people in P.E.I. basically paid 1 cent a litre more than what we paid in Nova Scotia. I found that very surprising and that's the information that I came away with - and anybody on the committee can correct me if I'm wrong.
MR. TAYLOR: Mr. Chairman, on a point of order. I would just say that when we asked the presenters at the hearing what Nova Scotia average they were using, they were talking about Halifax primarily and, I think, five or six other regional sites. So, in other words, the folks in Victoria, the folks in Sherbrooke, the folks in hither and yon may have been paying a whole lot more. So, I'm just pointing that out - and I know that's what we were told, you're absolutely correct - when asked what scenario in Nova Scotia they were using, quite frankly I think the response was quite fuzzy.
MR. CHAIRMAN: And we questioned that at that time.
MR. TAYLOR: Absolutely, Mr. Chairman.
MR. CORBETT: On a point of order, too, Mr. Chairman, that was the same department that said you can mail out $155 cheques and it would be okay.
MR. CHAIRMAN: Order, please.
MR. TAYLOR: Did you cash yours?
MR. CHAIRMAN: Gentlemen, we're here tonight discussing gas prices as a team and I think we should . . .
MR. MADDEN: May I respond to that?
MR. CHAIRMAN: Order, please. Yes, but I just want to make the committee aware of the reason why we are presenting ourselves to the community. Yes, Malcolm, go ahead.
MR. MADDEN: I won't dispute the findings if it's 1 cent or 2 cents. My argument is that the retailers were protected by that law that was there. If consumer law is 1 cent a litre, from 46 cents years ago to 90-odd cents now, they've lost a lot more.
MR. GERALD SAMPSON: When you say that you were protected, in what way?
MR. MADDEN: The retailers in P.E.I. were protected, it doesn't matter the price of the gasoline. If the consumers paid 1 cent more than the Nova Scotia consumers, it wasn't at the expense of the dealer retailers.
MR. GERALD SAMPSON: So in other words you're guaranteed a certain amount?
MR. MADDEN: In P.E.I. they are.
MR. GERALD SAMPSON: In P.E.I.?
MR. MADDEN: Yes.
MR. GERALD SAMPSON: Which is what?
MR. MADDEN: Minimum/maximum margin is what it's called. You cannot sell gasoline and make less - and I'm not sure of the price, but I think it's 3.5 cents, I'm not sure, and they can't make more than 1.5 cent over that.
MR. GERALD SAMPSON: And this is what Jason and Alison were hoping for?
MR. MADDEN: Yes.
MR. DEWOLFE: Mr. Madden, you've indicated you've been in the business for over 20 years and your grandfather before you . . .
MR. MADDEN: For 25 years, yes.
MR. DEWOLFE: Yes, 25 years, and it's interesting how when you play with these figures - and we were using 20 years in looking at the gas prices in the province, over 20 years, and came to the conclusion the gas prices today are about the same as they were 20 years ago if you exclude inflation and taxes. So that's an interesting scenario. I suppose it's probably cheaper to refine a million litres, or whatever, today than it was back then, too; there are better ways of doing things. But all in all we're still, in Canada, among the lowest in gasoline prices in the industrialized world, which is kind of interesting, but that doesn't
help the retailer and I guess that's what we're talking about today. I don't necessarily have any questions for you. I am just interested in your observations, like how are you notified of a price increase?
MR. MADDEN: I have a weekly price change - if there's a change.
MR. DEWOLFE: It's a weekly change with you?
MR. MADDEN: I have a weekly change, yes.
MR. DEWOLFE: Do you find that your customers will come, say, this morning and say, gosh, the price went up, I wish I had known. If I only had known, I would have come last night.
MR. MADDEN: The consumer has changed. Two or three years ago, yes, that was an issue and now you can almost tell them I think the price is going up tomorrow, yes, oh, well, some might get in their car and pump her up and some might not.
MR. DEWOLFE: People seem to be more intensely price-sensitive now though, aren't they?
MR. MADDEN: They're accepting it.
MR. DEWOLFE: Do you find that they'll drive across town to save 1 or 2 cents?
MR. MADDEN: They'll drive by my pumps to do it and that's a little town. Yes, they will.
MR. DEWOLFE: Sometimes it's not any cheaper for them to do that, but they'll do it anyway. It's interesting.
MR. MADDEN: One guy came in and took a debit card . . .
MR. DEWOLFE: It's a very competitive business, isn't it?
MR. MADDEN: Yes, it is and that's why you do it. That's why you see the same prices around the same villages.
MR. DEWOLFE: One of our members mentioned that the prices are similar from garage to garage, but really there is a difference that causes grief among the retailers. It probably would be better if they were more consistent?
MR. MADDEN: Like I said in my . . .
MR. DEWOLFE: My community has an Ultramar, right in my little community, it's the only garage and it's about 2 cents cheaper than it is in town - in a rural community, which is interesting. Ultramar, I don't know how they do it, but people drive 10 miles to save a couple of cents, you see, so it would probably burn more gas to come there just to save a couple of cents?
MR. MADDEN: Yes.
MR. DEWOLFE: Thank you very much for your observations and input.
[8:00 p.m.]
MR. CHAIRMAN: Thank you, Jim. I recognize Stephen McNeil.
MR. MCNEIL: Thank you, Malcolm, for coming in and doing your presentation. Just one question - you've been talking about regulations and I'm wondering what your thoughts were on the 48-hour notice that was before the Legislature this Spring and how it was going to affect your business?
MR. MADDEN: I could see more nightmares there. This would have been, for the retailers, if you have to announce a 48-hour price freeze and our tanks would have been empty until they could put some in at the new price. Gas companies aren't stupid, that's why they are where they are. I don't want to offend anybody, but that wasn't very well thought out for our industry.
MR. CHAIRMAN: Thank you, Stephen. Charlie Parker.
MR. PARKER: Mr. Chairman, I just have a quick question. You're in a very competitive business and the price has to be the same at your station as it is down the road. Is there anything besides price that you could use to attract people to your station, where they would be loyal to you? I see there are lots of contests, there are coupons, it used to be that you rushed right out and wiped your window clean and smiled and things like that, is there any other service that you could provide that would attract loyalty?
MR. MADDEN: At 5 cents a litre, I smile. (Laughter) The gimmicks are there, or could be there. I know Shell has a real good one with AIR MILES, they have a loyal customer base because of that, and I know for a fact that they still draw customers no matter if they are a cent or two higher.
MR. PARKER: People like AIR MILES.
MR. MADDEN: Nobody travels anymore but they like AIR MILES, airlines are going bankrupt. It's always in the back of my mind, and sometimes I think I'm being a little lax after being there 25 years, just sitting and saying what am I going to do now? I'm not going to do anything, I've tried everything.
MR. PARKER: There are some options there perhaps, are there?
MR. MADDEN: There were gimmicks for the years I was there, and sometimes you ended up losing money on them. I was with PetroCan and I was with Texaco.
MR. PARKER: PetroPoints?
MR. MADDEN: I just missed that one.
MR. PARKER: Do they work? Are there some options there?
MR. MADDEN: There is some customer loyalty to that, yes.
MR. PARKER: Is there? Okay, thank you.
MR. CHAIRMAN: Malcolm, any further closing comments?
MR. MADDEN: No, like I said, Paul, the dealer who couldn't be here tonight, mentioned to me that he had spoken to some other dealers who had some of their pricing with them, but they didn't want to do a presentation. If you could tell them where they could maybe give their paperwork to somebody.
MR. CHAIRMAN: Yes, indeed. Kim, at the back, you can speak to her and she'll forward on your request, provide you with all the information that's needed. Thank you, Malcolm, for coming and sharing your story with us this evening. Good luck to you.
At this time, I would like to call Walter MacAlpine.
Sir, it's nice to have you with us this evening. We would ask that you keep your presentation to 15 minutes and at that time, if you wish, we'll open the committee for questioning. I will just inform you, sir, that your comments are being taped this evening. So the floor is yours and state your name for the record, please.
MR. WALTER MACALPINE: Thank you, Mr. Chairman, and MLAs. I am Walter MacAlpine and I have been a retailer for 35 years in Weymouth, Nova Scotia. I have no written presentation tonight, I just wanted to come and talk to you people and I drove here
in this bad storm tonight to do that. Needless to say, it wasn't fit to come down, but I wanted to come anyway to let you know how I feel and what I've seen in 35 years of being a retailer.
A few years ago we felt like independents were a somewhat wanted commodity in the business, but we're not anymore. It's the Sobeys, it's the Canadian Tires, it's the Superstores, it's these types of people, but they're totally forgetting about the small business people in their community who are trying to survive on 1 million or 1.5 million litres per year. We're offering a service, like someone mentioned before, we check the air pressure in the tires, we still do the oil check, and we have people coming to us and begging us not to go self-serve because they don't know how to operate the newfangled pumps. We're still out there doing that, at less and less margin - I'm making less margin now than I have in 35 years in the business. This is 2004, we should not be operating on less than what we did in 1970. This is very unfortunate that we're in a business like that.
I've got something to turn over to my son - just - a station that probably is going to need an environmental assessment when I get done to turn it over and whatever. You know what they're worth? They're worth nothing. Who wants to buy a place that had some fuel pushed around the ground for 35 years after they're done with it? You have no value, no retirement assets built up at all in that business. So, for those young people, the Dickies and whomever, get yourself into real estate and do something else, because surely you're not going to depend on that gas station for a nest egg in the end, it's going to be no good to you after you work 30 years or whatever to pay for it.
The direction we see oil companies going in in the 35 years. It used to be about a 7- to 10-year cycle sort of thing, where they would go from company-run to retailers to independent dealers. Now they're mostly - I was talking to someone today or yesterday and they told me that they think there are four either lessees or independents now in the City of Halifax. That's unheard of. Like they are all commissioned agents running for the oil companies, or Canadian Tire or whomever, or someone else, so we are a rare breed out there, the independents.
They don't care for us anymore. They tell us that we should be doing 3 million litres a year to make it viable for them to deliver to us, and 3 million litres is just not there in small rural communities, and they're not going to be there with a self-serve down the road, where they're looking for market share like they do and reduce the prices like they do. In the Digby area, it's crazy, it's the cheapest in the Province of Nova Scotia - in the Digby area - it has been since the Dickies opened a Shell, because they're looking for market and they've got the market and Mr. Ecclestone and Ultramar, they're losing and Irving is losing the share to the other company that's back in the business after they were out for five or seven years. So it's just a mad dash for gallonage, and the small dealer is just nothing there anymore to the companies. It's like you're a number somewhere in their system sort of thing and that's about it.
We used to feel that we were wanted and part of the team, but you're not that anymore. You are just - I don't know what, but anyway, I just wanted to let you know that the direction it's going, if they continue with this I don't know how many small operators will be left in five or six years in the Province of Nova Scotia, because they just wouldn't be able to survive on these margins that they're working on now. If we don't have a minimum/maximum margin for the retailer in this province, say goodbye to a lot of us because we just won't be able to stay in business with the regulations.
After all, as you know - I think one or two of you mentioned that you had receipts in your pockets where you bought diesel and gasoline - we're great tax collectors for you people and I realize that all helps us as well if we drive on the highways and whatever, and the feds as well, but over the years you would think that we would be able to get a small portion. I think it should be regulated, that part, the minimum/maximum margin for us and we should be able to work out there doing a lesser volume, not the 5 million or 6 million litres of volume. I think it is very easy, as this gentleman was saying, for the companies to make presentations, but if they do that regionally I think you can justify those, but I don't think they can on a provincial-wide basis.
I have seen an awful lot of changes. It used to be that your contract was usually for five years and there were always other oil companies coming around expressing some interest when your contract was up. Is it near up, Walter, we might be interested - even last time, five years ago, at this time there was nothing, and we looked around a little bit, and I sympathize with the Dickies there because I talked to Shell, and there is just no way you can survive with what they're talking about. It is just unbelievable that they expect you to work and be open from 7:00 a.m. until 10:00 p.m. - or whatever the hours are - seven days a week and serve the public and work on those types of margins. They're crazy, you just can't do it; there is no way you can do it. They are just going to go under. We all will; we will not be around, the small independents.
That's about all I have to say and again, I think the only thing that will help us is a minimum/maximum margin.
MR. CHAIRMAN: Russell MacKinnon.
MR. MACKINNON: Mr. Chairman, first of all, with reference to 1991, I'll certainly go on the record and state that if I knew then what I know now, I certainly wouldn't have supported that piece of legislation, because what the oil companies said they were going to do and what they did were two different things. I think our witness had made reference to that in a roundabout way.
I wanted to focus specifically on that aspect of it, if I could, Mr. Chairman, simply because what's happening as I see today - for example, on Cape Breton Island, the Irving Corporation has the large percentage of all the service stations on the Island. My
understanding is they're about to divest their interest in those stations, with the exception of two, I believe.
MR. MACALPINE: They're going to be the low-volume ones, aren't they?
MR. MACKINNON: Precisely, yes. But what I see, at one time you could go to these service stations and it was a full-service deal that you would receive, now it's self-service, so you don't get that type of individual service you've spoken to. I think because things have become so convoluted as of late, particularly now, you drive down whether it's Quinpool Road or some other part of Nova Scotia, you'll see Canadian Tire now has service stations. It's just amazing that the consumer is the one at the bottom of the consideration list.
Do you feel that perhaps we, as a committee, should give serious consideration to legislating those types of restrictions that would ensure quality control to ensure the maximum benefit to the consumer?
MR. MACALPINE: Are you talking minimum/maximum service types?
MR. MACKINNON: Yes.
MR. MACALPINE: It is very difficult now with the situation you have in the Province of Nova Scotia. Take the Dickies in Digby, they don't have any place to change a tire, they don't have any place to do anything for you, like help with a fan belt or anything. They probably don't have a whole lot of tools at their location. You can't put those people out of business now with legislation for that, so I think it's very, very difficult to do it that way.
Years ago I think there were all types of things, you had to have a bay, you had to have certain mechanical people on staff - I think it used to be part of the regulations - for so many hours per day or per week and all this sort of thing. Those are all gone with the regulations of 1991.
MR. MACKINNON: Even along the 100-Series Highway, the TransCanada, the provincial government, I believe, near Alma, provided a considerable amount of subsidy to the Irving company that installed a service station near the exit there, but it's not full-service, it's just self-serve. I believe one of my colleagues in the Legislature raised this on a previous day about people with disabilities, they can't even access that. Their tax dollars are being used to further distance the consumer from the market, from accessing the best possible service. So if you have been in business for 35 years, you know there are certain things that we can do and certain things we can't do on the issue of regulation. By bringing in regulation we're not going to guarantee the best prices in the country, but there are other things that we can do with regard to the extent and the quality of service and how that's rated across the
province. I wanted to get your thoughts on that. I believe I heard you say that yes, we should give serious consideration to that, am I correct?
MR. MACALPINE: I don't know what . . .
MR. MACKINNON: I know you're saying at the same time that things have kind of been on the slide since 1991 and you're not so sure we will be able to bring it back.
[8:15 p.m.]
MR. MACALPINE: That's right. It's gone to the point where I don't know whether it can be at this particular time. I think probably with a minimum/maximum that you will save some people and encourage it through that, by giving them a little better margin and to expect a bit more service, however they see fit to do that would be great and in the areas that you can, but it's gone to the point where there's practically nothing there but a gas nozzle and you pick it up and dump it in yourself and somebody speaks to you through a speaker.
MR. MACKINNON: If you can read the instructions.
MR. MACALPINE: Right, or push the right buttons.
MR. CHAIRMAN: Gerald Sampson, please.
MR. GERALD SAMPSON: Welcome, Walter, and maybe you can shed some light on a question that I have. I pulled into a brightly lit yellow service station over the past year, a brightly lit yellow station where the air was completely blue. The guy had just received a bill of around $35,000 as a penalty for going over his quota. Now, involved in sales, you think the more sales that you would produce, the more money for the company - but the company was fining him for going over his quota of litres of gas. I didn't stay around long enough to get the explanation, but I know the station has since changed. Rather than being thanked, he was over his quota by 1 million litres or something - he thought he was just doing one fine dandy job until they nailed him with a penalty for going over that. Can you fathom that in any way, shape, or form for me?
MR. MACALPINE: No, I wouldn't be able to. It's best to talk to the oil company people about that when you have the opportunity, I would think.
MR. GERALD SAMPSON: The other one, Mr. Chairman, is the fact that when people get off the Newfoundland ferry - I'm from the other end of the province - there was a time when you could skip an oil change or a grease job or a filter in and you could make it to Halifax or make it on your way. But if you get off the ferry and you have tire problems, you can't go anywhere, and at a time when a lot of people were exiting Newfoundland. If you don't make it to North Sydney, and most people don't because you come off the ferry and
you're right on the TransCanada Highway and you're gone, and if it's after 6:00 p.m., the first place you can get a tire fixed is Baddeck, which is 35 or 40 minutes away. So the service to the community has been completely eroded.
The gentleman who did provide excellent service in the Bras d'Or area had 21.5 employees between the two bays and the restaurant. That's all gone and there's a car wash where the bays were, and there's a convenience store - and it killed the convenience store next door that had several employees. It's a disaster to the community, but a real bonus to the oil company.
So what we're experiencing here when I listened to the Dickies make their presentation tonight, they could be the Jones from down in Cape Breton or they could be the Jones from Halifax or down in Yarmouth or from where they are here. It's a similar story all across the country and I don't know - like you said, this minimum/maximum, is what I am hearing repeatedly, that's the only cure.
MR. MACALPINE: That's the only thing that's going to save the independent retailer. That's the only thing that's going to save us, and if we don't get that soon, some of us will be gone.
MR. GERALD SAMPSON: If the season is open on independent dealers, as it appears to be, then how are those who are not independent, how are they making their profit? Are they guaranteed a minimum or a maximum? How does their contract - if I went into a Shell store tonight and became the operator, but it wasn't an independent station, how would I make my money? Would I be guaranteed so much per litre or would I be put on the same meagre subsistence that the independents are?
MR. MACALPINE: I don't know, honestly, how the oil companies do it. I don't even understand the rack pricing and the pricing things. It used to be based on looking at the financial paper, seeing that oil was $40 or $27 or whatever, you pretty well knew how much a litre it should be, but that doesn't seem - we're so far, I just don't know.
MR. GERALD SAMPSON: What I'm trying to get my head around is the fact of the difference between independent, which is independent to the oil company, of course . . .
MR. MACALPINE: Are you guys going to be able to get any information from the . . .
MR. GERALD SAMPSON: Hopefully we'll have these questions lined up for the oil companies.
MR. MACALPINE: . . . oil companies, like on the deals that they're making. The deal with Canadian Tire, Connaught Avenue in Halifax, they're branded there now, and the
others that they have, and Sobeys is going with Irving, as well, with a deal, it would be great to see what those arrangements are. There's where I think the meat to a lot of your questions would be, into those deals.
MR. CHAIRMAN: Mr. DeWolfe.
MR. DEWOLFE: Mr. Chairman, just very briefly. I'm interested in the comment you made initially, that you're making less margin today than you were 35 years ago. I would like to ask, what was that margin 35 years ago?
MR. MACALPINE: I forget what it was, but I know that at that time it went a lot farther than it does now. We have so much, our costs of operation, permits and fees and insurance, the systems for credit cards, your phones, your faxes. It's just so different. Probably then they can blow me out of the water by that statement. The margins weren't anywhere near, but they went a whole lot farther at that particular time than what they do now.
We've seen it, totally, since deregulation, like Malcolm said, a few years after that, three, four, five years I guess it was, and then it started slipping and going. In the last few years, it's really gone to where the dealers - you're not only going to hear this in Yarmouth, wait until you get to Antigonish and some of the other places, you're going to hear it from Henry Overmyers and the Bob Graces and everybody else around the province. They're in the same situation the Dickies are in and myself and everyone else, we're not making any money.
You're looking at u-hauls, you're looking at used cars, you're looking at real estate, you're looking - we have to be all kinds of things in business now to survive that sort of thing, convenience stores and whatever. Then the big stores are knocking the hours out of us on convenience stores, you have Sobeys and Superstore keeping convenience store hours now. So where are you going? It's eating into you all around.
MR. DEWOLFE: Thank you very much for your presentation.
MR. CHAIRMAN: Mr. Frank Corbett.
MR. CORBETT: An interesting story I had with an executive of one of the large leasing companies. He had talked to one of the large oil companies, gasoline, and he had said that the oil company had met with this company and said, look, are you interested in taking over - for the sake of argument - 100 of our pumps, 100 of our locations? So, they said, well, let us go back and study them. So they go back and study them, and they come back and say, roughly, well, there's about 35 we're interested in. To that they said, well, we'll keep the 35,
are you interested in the other 65? That's a pretty cutthroat way of doing business. Mr. MacAlpine, what flag do you sell your gas under?
MR. MACALPINE: Ultramar.
MR. CORBETT: You're an Ultramar dealer?
MR. MACALPINE: I've been with three different companies in 35 years, PetroCan, Shell and Ultramar.
MR. CORBETT: So you own the station?
MR. MACALPINE: Yes.
MR. CORBETT: Except for time and place, they're all pretty much the same?
MR. MACALPINE: They're like going to a wedding, the bride looks great coming down the aisle, but . . .
MR. CORBETT: You sound like a commercial . .
MR. MACALPINE: . . . a few days later that may change. (Interruptions) I didn't know that was being recorded. (Laughter)
MR. CORBETT: I think that may be a great analogy, sir, for a whole lot of reasons. My colleague here is talking about the air being blue. The fact is though, it all starts out as a very good relationship, I think is what you're saying, and then it seems to deteriorate from that.
MR. MACALPINE: Well, not really. Before, like I said, we sort of felt that we were part of - a respected part of this whole, huge, global thing that you're looking at, but not anymore. The big-box stores are in there. We're the fringe, the dust of the lot, sort of thing. We don't mean anything anymore. But yet the community - if I close, in Weymouth, it leaves Weymouth Motors left and then Clare Dodge down the road, but a few years ago we had six or eight locations around there, but they're not there anymore because they can't afford to be there anymore. I just spent over $100,000 on my last installation, when I put double-wall protection and pipes and spill protection and all this sort of thing. It's just unreal, the costs to get going in the business.
MR. CORBETT: Just one final question and then I'll let you go. If you were to put the lock on your business tomorrow, who's responsible for the cleanup of that property?
MR. MACALPINE: I am.
MR. CORBETT: Is there a specified time, or . . .
MR. MACALPINE: No, I don't think there's any specified time because there's one that closed in Weymouth and it's been closed for three years now, and they haven't cleaned it, the tanks are still there.
MR. CORBETT: So there's no specified time that the Department of Energy says you have to clean, but it's absolutely useless to you.
MR. MACALPINE: You come along and want to buy it, you're going to want an environmental assessment; therefore, I would have to do it, clean it.
MR. CHAIRMAN: Any other questions? Russell.
MR. MACKINNON: Quickly, if I could, to Mr. MacAlpine, I understand the dilemma that the small service station operators find themselves in today. Do you find that the consumers are complaining?
MR. MACALPINE: Consumers don't seem to - like Malcolm said before - they're watching, because we see it in our sales. If for whatever reason Ultramar can keep our prices down to the Digby level, our gallonage stays pretty equal.
MR. MACKINNON: Aside from that issue, I'm talking about the service, I'm talking about the fact that they don't get their tires changed like they could before or get a lightbulb changed or a wiper fixed, that sort of thing. Obviously the more we see the Mainways, the Irving Mainways, there's less and less service. It's more like a little convenience store, like a multi-service type unit now; you find bank machines, you find groceries, just about anything you would want on the way home from work. Is there greater consumer satisfaction, or is there less consumer satisfaction, do you find? You've dealt with a lot of people coming through your service station over the years. Are they complaining, or are they generally satisfied?
MR. MACALPINE: I think they're satisfied, but I don't think they think very much until they actually have an emergency. Then they could make all kinds of reasons why that should be there, but then they could go on for five years and not have an emergency and, therefore, it wouldn't be factored in at all in their thoughts. So if you did a survey on it, it probably wouldn't show up at all.
MR. MACKINNON: Mr. Chairman, I ask that because I wanted some clarification on this issue of turning back the hands of time. If government has within its authority to be able to do something in that regard, would that really benefit the consumer? I wanted to get your thoughts.
MR. MACALPINE: I think it would, myself, because it would put some stability there, at least minimum coverage for certain types of service, sort of thing. How much it would be appreciated or how much the consumer would pay for that, I don't know. They're still looking, I think, for the self-serve price.
MR. CHAIRMAN: Any further comments?
MR. MACALPINE: No, just, again, if you guys could just look at that minimum/maximum figure for us, it has to be a minimum of 5 cents.
MR. CHAIRMAN: We're certainly hearing that.
MR. MACALPINE: And where that maximum should be, I'm not sure, but I'm sure you guys will have a good idea when you finish your hearings, where that should be.
MR. CHAIRMAN: Thank you for your presentation this evening. Thank you very kindly. At this time I would like to call on Daniel Thimot. Good evening, sir, how are you tonight?
MR. DANIEL THIMOT: Pretty good.
MR. CHAIRMAN: Are you familiar with the rules of the committee tonight, or did you walk in late? It's 15 minutes, and I would also like to inform you, clearly, that your comments are being recorded. (Laughter) You have 15 minutes; you have the floor.
MR. THIMOT: I would like to thank the committee for coming in to hear our views on this. I am a dealer, also, an Esso dealer down in Meteghan Centre, only a 35-minute drive from here. We have a three-bay operation, full-serve, self-serve, convenience store. I've been working in the business for the past 25 years, give or take; I started pumping gas at the age of 13 and I've been in and out of there pretty much all my life. Just before I came here tonight I called my father up, because he owns the site and I pretty much run it for him now, and I asked him what he was making on gas years ago. He said 20 cents a gallon. Right now, self-serve regular, my margin is 3.01 cents per litre. I'm making less money today than he was; without accounting for inflation and all that, he was making more money many years ago than I am making today.
[8:30 p.m.]
My expenses have gone up. My credit card fees are 1.8 per cent, my insurance right now, I think is in the over $10,000 range, which you know I have to have. Minimum wage isn't $1.50 anymore, I think it's a bit over $7.00 an hour. We're getting squeezed from every side and we need at least a minimum margin. The Dickies specified 5 cents, which I think
is a reasonable amount. That's what we need to survive on. You know we're getting squeezed from every side. The oil companies, the way they look at it, they say, well, you have to make your money in your stores. But everybody is cutting the price of everything in the store and you can only sell so many bottles of pop a day, that's not what's going to pay all your bills at the end of the day. You have to make money on everything you sell in the store, including your gas. We're there to make money, just like you guys. You know you don't go to work every day just for the fun of it, you may enjoy your job but you need to get an income out of it too.
What we don't know is basically how the oil companies set their prices. A couple of weeks ago I was making 5.5 cents a litre, it has been going down, down, down and now it's down to 3.01 per litre on self-serve regular. That's not enough to survive. You know if somebody comes in with their credit card, it takes most of my profit away. I still have to pay my lights, I still have to pay my heat, I still have to pay my employees. My overhead doesn't go away even though the price of gas or my profit margin isn't that big anymore.
We are approximately a 40-minute drive from the Dickies' site and we hear it almost - and I can't say really on a daily basis but very often, you know, they say why is your price higher than Digby? I don't have the answer for that. I don't know who's making money in Digby, if anybody is, because they're selling gas for, on average I would say, at least 4 to 5 cents lower than what we are and I'm making hardly any money on gas, so I don't know if everybody is losing their shirt in Digby and has been consistently for the past few years, it's not just for the past couple of weeks.
My biggest concern is that we get at least a minimum profit. It's like Walter MacAlpine said, we can get a minimum/maximum profit. I know on P.E.I. they're making more money on gas than what we are over here and that's what we need to survive. That's pretty much my biggest concern right now with what's going on in the industry.
MR. CHAIRMAN: Russell MacKinnon.
MR. MACKINNON: Mr. Chairman, I wanted to focus on this issue about being guaranteed a minimum/maximum. How do you feel about the possibility - I'm just thinking aloud here - if that minimum/maximum was somehow related to the extent of service that's being provided? If you have a full-service station as opposed to a complete self-service and that profit margin. In other words, the greater the service to the consumer and the greater the latitude for profitability
MR. THIMOT: I would definitely think that's a good idea in a way. I got full-service and self-service both and a couple of years ago we had a big discussion with our oil company to go strictly self-serve, because it was getting to the point where the sales of full-serve gas, I couldn't justify that extra employee. We considered it, we had been putting it off for a few years and right now it's on hold, but I can't say that issue is not going to surface again. We
need to make money to pay for the employee, they don't work for nothing. I would support something like that, if you can make a bit more money on full-service gas, because it's in the paper every once in a while where there is a community that loses a full-serve site and the seniors and the disabled people can't buy gas because they can't pump their own, so they're stuck.
I realize that these people need some protection but if the dealer doesn't make enough money to justify the service, the consumer won't get the service.
MR. MACKINNON: One final observation, Mr. Chairman, on that. Our witness here this evening, I believe, has clarified the essence of what we as policy-makers are seeing and I'm sure consumers as well as retailers in the business. But there is one factor that's missing in this equation to date, and that is we haven't heard - and I'm hoping maybe we will before we conclude our hearings - from the oil companies. There is an uneasy silence out there about this. I think it is important that we are hearing from the retailers and I'm sure we'll hear from the consumers, but we're not hearing from the oil companies yet. So I'm putting that on notice that I'm hoping that somebody will come forward so that we'll hear the full story. I would like to acknowledge and thank our witness.
MR. THIMOT: I would be surprised if they testified.
MR. MACKINNON: I put that on record, Mr. Chairman, because they were very quick to come before the Law Amendments Committee pleading the case for deregulation. I think they should be very quick to come before the committee and explain their position in this mix of the equation as well.
MR. CHAIRMAN: Charlie Parker.
MR. PARKER: Mr. Chairman, I guess Russell MacKinnon has really touched on some of the points that I was going to mention. But it's interesting here tonight certainly that all of our presenters have been retailers and we haven't heard anything, at least to this point, from a consumer. Perhaps that's because gasoline is down a little in price from what it had been just a month or two ago. I know we were over $1 per litre not that far back, we are less than that at the moment, but I'm sure we're going to hear from some consumers. I guess all of us, really, are consumers, even those who are retailing the gasoline as well.
The main thing that we've been hearing though from the retailers - and you're the President of the Retail Gasoline Dealers Association of Nova Scotia?
MR. THIMOT: Yes, I am.
MR. PARKER: You would like to see a minimum/maximum price for retailers and I guess that may depend on whether it's self-serve or full-serve.
MR. THIMOT: Definitely.
MR. PARKER: Can you give us an idea of where you think that price range should be for each of those self- and full-serve?
MR. THIMOT: I would say for self-serve it should be at a minimum of 5 cents and full-serve, which costs more at the pump, should probably be - well the gap is usually around 2 to 3 cents - so I would say probably give or take around 7 cents.
MR. PARKER: That's your minimum?
MR. THIMOT: Minimum.
MR. PARKER: Then a maximum, any suggestions on that?
MR. THIMOT: Probably a cent and a half more, give or take.
MR. PARKER: So 5 cents to 6.5 cents for self-serve and 7 to 8.5 for full-serve?
MR. THIMOT: I would say, yes.
MR. PARKER: Another question, Mr. Chairman, I guess somewhat related but we talked about regulation and it is in P.E.I. at this time. I was going to say that it works in P.E.I. and that's a matter of debate, and it's in Newfoundland as well. Do you think regulation has any merit here in Nova Scotia?
MR. THIMOT: It will stop the daily fluctuations on pricing but the consumer is still going to pay the price of gas. We have seen it in the media, well, when it hit $1 a litre, we saw it in the media in the United States, we saw it all over the place where the price of gas was seen at record highs. So whether it was regulated or not, somebody is going to have to pay that price. Refinery costs have gone up, because Irving spent $1 billion to upgrade their refinery in Saint John, I think Imperial spent a whack of money for the cleaner gasolines they've got to supply right now. So, you know, the wholesale price of gas, refining and all that, somebody is going to have to cover that and the consumer is going to pay for that obviously. In the long run, regulation, I don't know if the consumer will save in the long run because somebody is going to have to pay for the price of gas. Instead of spiking up and down, where it went up 3 cents or 4 cents a couple of days ago, so instead of spiking up 3 cents all of a sudden, you have to have a meeting, well, it's going to have to go up eventually.
MR. PARKER: It slows the process down, I guess, doesn't it, or sort of smooths it out somewhat. I guess finally, Mr. Chairman, we talk about minimum and maximum as one option for retailers or talk about regulation or not. Any other thoughts on what could work for Nova Scotians, for consumers in this province, to have more reasonable gas prices?
MR. THIMOT: One thing I've seen, like the price of gas was fairly high, but I haven't seen the vehicles shrinking on the road yet. So, you know, they don't need to buy the big SUVs, they can buy smaller cars, but that's easier said than done. Maybe in the long run we'll see a change. In the short run we haven't seen it yet, you know. Instead of driving all over hell to save a penny a litre, pull in at the first station, it's probably cheaper in the long run than to drive across town to save 1.5 cents or 2 cents and burn $3 worth of gas to go get it.
MR. PARKER: That's right, I hear you there.
MR. CHAIRMAN: Any further questions? I would like to recognize Brooke Taylor.
MR. TAYLOR: Just a couple of things, I think it was Mr. MacKinnon who mentioned that the oil companies haven't lined up to make presentations. I'm just reading here, once again in referencing Ontario's gas committee's report and the oil companies, in fact, did make a presentation. We've learned here this evening, Mr. Chairman, that they probably will make a presentation somewhere along the line during our meetings, but the oil companies claim that over the medium term the wholesale price of gasoline obviously has a direct influence on the retail price and I think that's well established here this evening. A number of the independents have mentioned that they would like to have a guaranteed margin and that seems very reasonable, but in order to have that guarantee, would you not have to have the seller levelling the playing field to all the retailers?
MR. THIMOT: You mean everybody buying at the same price?
MR. TAYLOR: I guess within reason, relative to transportation?
MR. THIMOT: I don't think that would be out of reason, no. Then we would definitely be competing on a level playing field with our competition.
MR. TAYLOR: You see I don't think there's anybody out there in Nova Scotia who thinks that this committee can wave some magic wand and lower the price of gas, but a lot of people have told me they would like to see these oil companies, by way of some price justification, be responsible to the consumer, you know, the motorist and the trucker out there.
Nobody is suggesting that the international cartel doesn't set the price of crude and the refiner has to buy that crude, but the concern I have, after going through this information - and I'm sure there's all kinds of information out there - at face value at least, it seems clear that the wholesalers - you have integrated wholesalers/retailers who are competing against the independents - according to the information - and this is information that has been produced by governments of different stripes - what they're saying is that it's much, much easier for the integrated wholesaler/retailer to bury the perceived profit margin, if you will,
because you're integrated, because you're interconnected, but whereas you and a number of the independents, and all the independents, are stand-alone, you're at the whim of the wholesaler, are you not?
MR. THIMOT: Definitely.
MR. TAYLOR: Yes.
MR. THIMOT: They set the price. I get a fax, I got a fax I think yesterday afternoon, or the day before, and it specified the price and if I want to deviate from that, I take the loss.
MR. TAYLOR: Yes. Well, I know the Canadian Petroleum Products Institute will step up to the plate sometime along the line and I fully intend on asking them what difficulty they have with wholesalers having to justify the price that they're charging the retailers in this province, but anyway, I just wondered from your perspective.
MR. THIMOT: That's what we would like to know, you know, how do they set their wholesale price. I realize that our wholesale price, what they call this rack pricing, is based on New York Harbour price. I don't know why they went that way and if you go in Ontario, it's based on I think Detroit or that area, the American price. So it's all based on their free market system, but there are ways to lower the pricing because most of it is taxes, it's not all hard profit. We can't take any less than what we're taking now. We're having a hard time surviving the way it is, but we need - well, I don't know if you can get a justification on the wholesale price, most definitely.
[8:45 p.m.]
MR. TAYLOR: Are you purchasing through the Wilson Fuel Company?
MR. THIMOT: Yes.
MR. TAYLOR: And I'm just curious in your community, at your particular establishment, what the selling price is. You sell regular unleaded?
MR. THIMOT: Yes, we do.
MR. TAYLOR: Now, is this self-serve?
MR. THIMOT: I've got both full and self-serve.
MR. TAYLOR: And they don't make any distinction when they sell you that product, do they? You pay for regular unleaded whether it's self-serve or . . .
MR. THIMOT: I make a little bit more on full-service.
MR. TAYLOR: But I mean the wholesaler, when he's selling to you, he doesn't care if it's self-serve or full?
MR. THIMOT: Well, he has got me set on a commission.
MR. TAYLOR: I see.
MR. THIMOT: So he puts the gas in the ground and when it comes out of the nozzle, it's mine.
MR. TAYLOR: I just know that this particular independent, and this is just a short time ago, he's purchasing regular unleaded and when you include the tax rate exempt the market price, it's 84.755 cents to purchase that product. Does that ring much familiar with what you might be paying?
MR. THIMOT: We just had a meeting, a Retail Gasoline Dealers Association meeting, I think the first or second weekend of May, and I was hearing this from everybody, you know, it's a very common occurrence where dealers are making 1 cent and 2 cents per litre, you know, they're hardly making anything. So it's not uncommon to hear that.
MR. TAYLOR: Do you sell diesel fuel?
MR. THIMOT: No, we don't.
MR. CHAIRMAN: I would like to recognize Russell MacKinnon.
MR. MACKINNON: Mr. Chairman, as the representative for the retailers across the province, I understand, well, essentially what I notice anyway, if you go to the service station, there are three grades of gasoline; there's regular, premium and supreme, correct?
MR. THIMOT: Regular, mid grade and the supreme, yes.
MR. MACKINNON: Does most of your membership have two tanks or three tanks?
MR. THIMOT: I can't answer that. I just have two tanks.
MR. MACKINNON: And then you have the mixer, you have the regulator?
MR. THIMOT: We're getting new pumps and it's just a mix, you know, the mid grade isn't a special product, it's just a blend of the two.
MR. MACKINNON: How often is that inspected by the provincial regulators?
MR. THIMOT: My tanks and my products in the tanks?
MR. MACKINNON: Yes, to ensure that the mix is proper?
MR. THIMOT: I honestly don't know.
MR. MACKINNON: Would you give an undertaking to members of the committee to be able to provide that information because there have been questions raised about the mix by a number of constituents of mine?
MR. THIMOT: It's not regulated so . . .
MR. MACKINNON: It's not regulated?
MR. THIMOT: Why would it be? I don't think it is as far as I know.
MR. MACKINNON: But if you go into the pumps and you pay for premium, okay, that's not regular and it's not high-test like the supreme, it's halfway in between, or at least it's meant to be. That regulator, that pump is supposed to take so much regular gas out of the regular tank in the ground and so much of the supreme and it mixes it and then pumps it out as premium.
MR. THIMOT: That's right.
MR. MACKINNON: You're saying that's not regulated?
MR. THIMOT: I don't think so, I don't know.
MR. MACKINNON: I guess I'm looking for quality control. How would the consumer know whether they're really getting premium? They may be getting more regular.
MR. THIMOT: I think many oil companies . . .
MR. MACKINNON: I can take that on notice, rather than get bogged down with a lot of . . .
MR. THIMOT: Yes, many oil companies will specify an octane on the pump. So just regular gas is 87, octane . . .
MR. MACKINNON: But aren't there provincial inspectors?
MR. THIMOT: I've never seen one.
MR. CHAIRMAN: We also have the power to ask that question as well, member. We can write a letter to the industry.
MR. MACKINNON: No, it's not so much the industry as it is government overseeing too many . . .
MR. CHAIRMAN: Well, we certainly can write a request of our government to supply the information to the committee. But, your question is quite in line if you would like to have Daniel answer, by all means.
MR. MACKINNON: Sure, as well. I'm a little surprised to hear him say that it's not regulated.
MR. THIMOT: I don't think it is. The only thing, if you look at it - I have the Esso banner and I'm quite certain that Esso wouldn't want me to sell an inferior product, because I am selling their product. They seem to think, and I think, it is a premium product. They have their own secret additives in their product. What I get at my pumps is not the same as what gets delivered to Shell or Irving or whoever else. As far as I know, they have their own batches with their own additives. I'm sure Esso wouldn't want me to sell an inferior product. I've heard of truck drivers getting fired for dumping the wrong product in the tank - dumping the regular into the supreme tank, or something like that, by accident. They're quite strict on that.
MR. MACKINNON: From a consumer's point of view, you can appreciate where I'm coming from.
MR. THIMOT: Most definitely.
MR. MACKINNON: If that mix was off by 5 or 10 per cent, that's the issue of profitability.
MR. THIMOT: People think they are getting an 89 octane and they may be getting an 88 octane. Most definitely, yes.
MR. MACKINNON: Perhaps if you could give an undertaking to the members of the committee to find out what percentage of your membership have the two tanks and what number have the three tanks?
MR. THIMOT: I think a three-tank system is not very common. Most pumps are blender pumps, as far as I know. We're in the process of upgrading our pumps to blenders.
MR. MACKINNON: Thank you.
MR. CHAIRMAN: Thank you, Russell. I'd like to recognize Brooke once again.
MR. TAYLOR: Yes, thanks, Mr. Chairman. Just a couple of quick questions. Could you tell us what the terms of payment are that generally independents are required to follow with their wholesalers?
MR. THIMOT: I think generally there's a couple of different ways that it's done. I signed a new contract with Esso just a month ago and I've negotiated with most oil companies. Most of them, what they wanted me to do was, they would drop off a load of gas in the ground, I'd cut them a cheque for the gas and I'd try to sell it for what I could get for it. But with the agreement I have, I pay my gas twice a week, after it's sold. What I sell today, is going to be paid tomorrow or Friday morning. They take that out of my account automatically.
MR. TAYLOR: So it's COD, give or take some days, I guess. Is that . . .
MR. THIMOT: Not with me. I only pay for it after I sell it.
MR. TAYLOR: After you sell it. I've been told some are . . .
MR. THIMOT: COD. Yes. I couldn't afford to go COD because to fill my tanks might cost me - I don't know what the exact price is, but with the price of gas today, it might be anywhere from $35,000 to $45,000, which I really don't have the money for.
MR. TAYLOR: I see some of our former presenters nodding their head in acknowledgement that perhaps they are on COD. This is something else the independents are telling us, that as far as they're concerned, although they haven't the hard, fast evidence and it's just an allegation, that the integrated stations - you know what I'm talking about - they have different terms of endearment, so to speak. Again, in an effort to level that playing field, Mr. Chairman, I wanted to raise that and I appreciate the response.
MR. CHAIRMAN: Thank you, Daniel. Any further comment?
MR. THIMOT: Yes. Basically, the only thing I would like the committee to understand is that the small dealers in Nova Scotia are going through a fairly hard time. As Walter MacAlpine said, a few years ago before deregulation came around, there was around 1,200 sites in Nova Scotia. I don't have the exact number right now, but we've been slowly decreasing into the under-500 mark. Just in the past little while, the numbers have come up again a little bit because the big-box stores are getting into the market. Whether they'll squeeze us out of the market or not, I honestly can't answer that. If they do, you'll have to
depend on the Midas and Canadian Tire dealers to get your car fixed because I won't be there anymore. I may be working for Midas or Canadian Tire, but I won't be there anymore.
We're all getting squeezed by every side. Our overhead is definitely not going down, our profits aren't going up to compensate for what our overhead is. We need a bit of protection, you know. Like Malcolm said, we need some protection to help us survive for the long run. I give a lot of service to my customers, I'm quite diversified so we're doing okay. We're not doing great by far, but we're doing okay.
I've 14 employees, I'm a fairly big employer in my area. I've quite a few students working and I like to take good care of them because most of them go off to university - every year I lose a good crew - and I train them quite well, I train them to give good service. We discussed earlier how to increase your gas sales and one of them is through good service. I feel my site has one of the better services, we have a loyalty program with the Esso Extra and we're grateful for Section 15, which passed a few years ago, so we don't have to pay for our points anymore - well, I never did, but we don't have to pay for our points. It's a good loyalty program, but you need to really take good care of your customers to keep them. We fix flats, we do replace the odd bulb, but if I went to strictly self-serve, I wouldn't have any employees to do that.
MR. CHAIRMAN: Thank you very much for your presentation and good luck to you as well.
MR. THIMOT: Thank you.
MR. CHAIRMAN: At this time I would like to call Barry Wiser. Barry, you've been with us this evening - do I have to go through the rules of procedure?
MR. BARRY WISER: No, I remember them and I will be less than 15 minutes.
MR. CHAIRMAN: Thank you. Anyone else who would like to make a presentation, I would ask that you contact Kim at the back of the room, because this is the last presenter. State your name for the record, you have the floor.
MR. WISER: I'm Barry Wiser. I'm strictly a consumer, I guess I'm quite glad I'm not a retailer, to be quite honest. I haven't done this before, so maybe you'll have to bear with me.
As a consumer, obviously I'm concerned with the price of gasoline. I realize - and it was certainly reinforced even more today that we, as a province, we're not going to influence the big oil companies. I think we're two-tenths of 1 per cent of the population of North America so we're quite small in terms of having any influence. I think that's been borne out
with other comments today. If you look at that as a way to influence prices, that's not going to happen.
At the same time, I think I would look at it that there's also been talk from time to time of lowering taxes on gasoline and that would be a way to reduce the price. If you lower the taxes on gasoline, the province gets less money, the province has to make it up in some other way. So ultimately, the consumer, in the long run, probably isn't really benefiting a great deal. So, in looking at that, I really didn't focus on that in terms of how we can save money on our gasoline prices.
[9:00 p.m.]
If we can't change the price that the big oil companies charge and if, at least to me, it doesn't really make a lot of sense to try to lower the taxes that we actually pay, I guess I come to the point of suggesting that we as individuals, each individual within Nova Scotia, look at changes that we can make to significantly use less petroleum products, and that the provincial government look at ways to support and encourage these changes.
I happen to be a psychologist and as a psychologist I'm in the business of looking at how I can help people change their behaviour. Really, in this case I'm looking at the province as being the primary force that can help people to change their behaviour in use of petroleum products. There are probably numerous ways that we might influence consumer behaviours to use less petroleum products. As I said I was going to be short, I thought I would just focus on one that made the most sense to me and also looking at it in terms of what can be somewhat revenue-neutral for the province - not being Alberta and not having lots of money - and that would be how we can influence people to gradually switch to vehicles that use quite a bit less gasoline or fuel otherwise.
In fact, some figures that have been utilized, it's realistic to look at that indeed if we did switch over to more efficient vehicles we could save, on average, 25 to 33 per cent less fuel and still have the same performance in terms of vehicles, and those vehicles still have the same capabilities. So really I, in my own thinking, find that there's really no reason why we can't support people in switching to vehicles such as using diesel fuel, switching to vehicles which are hybrid, as well as certainly the high efficiency of smaller vehicles using the traditional gas engines and, well, within the next six months, within the next year, that those types of vehicles can range from what people traditionally think of in terms of the very small vehicles, but now also includes mid-size family vehicles. The diesel Passat would be one example, and even looking at the SUVs where there are going to be a number of hybrids as well as diesel vehicles, if they're not out now, they will be within the next six months.
I guess I'm talking here with you in that I feel the provincial government could play a role in influencing, motivating, supporting, encouraging - however you want to look at it - these kinds of changes, again in a revenue-neutral sort of way, and that would be by
providing a sales tax incentive, or sales tax rebate, for such high-efficiency vehicles and, at the same time, to make it revenue-neutral to impose a tax surcharge on vehicles with a particularly poor mileage. You know you could exempt commercial vehicles because, indeed, commercial vehicles may have a specific purpose which they would have to be much larger in size. People would still have a full range of vehicles to choose from, but would now have an incentive to choose efficient vehicles - and there would be a side benefit that more efficient vehicles happen to be less polluting.
So, yes, the government could support this at no loss of revenue. We would end up using less petroleum; we wouldn't have to deal with the oil companies as much; and if indeed that happened on a large scale, by 25 per cent to 33 per cent, even if prices went up we would still be somewhat ahead in the game. You would still have vehicles that perform as they do now and still have the same capabilities. Government loses no revenues and, really, I mean ultimately our economy would have some efficiency and some competitiveness by promoting this more fuel-efficient transportation and I hope the Legislature can take a role in promoting that. Thank you.
MR. MACKINNON: I hadn't contemplated on asking a question, but since he was talking about efficiency, I felt compelled to share my experience with my truck. It's seven years old and I've only changed the oil in it three times and it has 305,000 kilometres as I pulled into the parking lot here today and, yes, it has gone through a few barriers over the years, but I would like to compliment the witness on that particular initiative because I think it's innovative, it's futuristic, and the fact that it's revenue-neutral to the government I think would be a strong selling point - this government very jealously guards their tax revenues.
My question to the witness through you, Mr. Chairman, have you done any analysis beyond a general scope? Have you looked at details like how many vehicles in Nova Scotia and what percentages do you suspect would be inefficient versus efficient and that sort of thing?
MR. WISER: I haven't done that specifically in terms of Nova Scotia and numbers of vehicles. Certainly I've looked at numbers and estimates in terms of what percentage gain you could make, and that's where I came up with the 25 per cent to 33 per cent figure, but indeed no, I haven't done a fine analysis, but basically you look at, okay, a traditional family car, what will a diesel - well, I'm not trying to promote Passats particularly, but that's the newest diesel car of that size - what benefit will you get using that as opposed to cars that are roughly equal in size? And you can do that across the board, the same with the SUVs and the hybrid SUVs that are coming out and those are the figures that are talked about. I haven't closely investigated that, but certainly I've done a fair bit of reading along those lines.
MR. MACKINNON: Perhaps - through you, Mr. Chairman - our witness would be kind enough to supply that detail to members of the committee. I would be interested in reading some of that.
MR. WISER: Okay, sure. I'm not a technical person, but certainly it's more along the lines of consumer reports and those sorts of things . . .
MR. MACKINNON: That's fine.
MR. WISER: . . . but certainly I would be happy to pull that together.
MR. MACKINNON: Thank you, Mr. Chairman.
MR. CHAIRMAN: Brooke.
MR. TAYLOR: Again I would like to thank Barry for his presentation. I think that in theory it certainly has some merit in the ideal world but, not to criticize the presentation, I have run some diesel vehicles and can tell you that the new EPA standards have seen many, many people in the trucking industry, for example, move to the more efficient engines, and the cost differential when you go to replace isn't that great, but one of the concerns we have in rural Nova Scotia is that we don't have the luxury of jumping on a bus or popping in a taxi. Many people buy cars that will help them get from their home to the supermarket, to the post office, to town, and it would be very difficult without doing some in-depth cost benefit analysis to understand what type of financial incentive you could offer to the people out there and the time frame it would take to put that in place and the implications would have to be clearly spelled out.
I certainly subscribe to that theory and I'm very pleased that the trucking industry is moving - mind you now, they have to move in that direction because of the emission standards that are in place and I think it's appropriate, but we have to recognize that without some financial support, because of the differential between that gas engine and the diesel - as you alluded to - it would just be so cost prohibitive to folks out there, they would be unable to purchase those types of vehicles.
MR. WISER: Sure.
MR. TAYLOR: But does it have merit? Yes, I think in theory, but in practice I don't know how, Mr. Chairman, it would play out. Even if a percentage of our citizenry moved in that direction, it would certainly cut down in the use of petroleum products and we would all appreciate that, and we've also been told that the price of refining a litre of diesel compared to a litre of gasoline is not that much in the difference; in fact it's so minute to refine, and our professionals may tell us this a little later on at another presentation, that my concern would be that diesel fuel would probably go through the roof, because, now when it's costing about the same to refine each, we find that diesel is less. But why is it less? Does it have to do with consumer demand?
MR. WISER: It's also a less refined product, but what will actually happen in 2006, there would be new requirements for low-sulphur diesel fuel, which - well, there is a pollution problem with particulate matter with diesels, and when those new regulations go into effect, that will certainly solve that problem; however, I suspect diesel fuel will cost about the same - I have no exact idea, but you still get the one-third better mileage with it. Indeed, you're right, it would be a very gradual change, if there was a partial rebate.
MR. TAYLOR: Just to corroborate what you had said about lowering the taxes in New Brunswick, again this Ontario report found that during a period of two to four years after there was a tax decrease in gasoline prices in New Brunswick, the lower rate of gasoline tax in the province did not produce correspondingly lower gas prices, relative to other jurisdictions. The committee was of the opinion that for the period, New Brunswick consumers did not receive the full benefits of the decrease. If you read further, it indicates or implies, it's explicit, the oil companies, either by way of refiner or marketer or retailer, increased the price. So New Brunswick didn't receive the benefit of the tax decrease. If there is to be any tax decrease, it has to be guaranteed that it's passed on.
MR. WISER: Maybe I didn't express myself . . .
MR. TAYLOR: No, you did, but . . .
MR. WISER: . . . but in terms of having a tax rebate on the actual purchase of the vehicle, at the retail level rather than the actual fuel. And it would be a gradual change.
MR. TAYLOR: Ontario was doing that . . .
MR. WISER: Yes, that's right, a number of jurisdictions have those kinds of programs.
MR. CHAIRMAN: Mr. DeWolfe.
MR. DEWOLFE: Mr. Chairman, I just wanted to make a comment that, further to your discussion about fuel-efficient vehicles and moving in that direction, the big three that we talk about here in North America, through their parent companies in Great Britain, are already building, they have the technology and they're on the road in Great Britain. To stand on a street corner in London or Paris to see a gas guzzler go by, people stop and stare because it's not very often you see them. So the technology is already there, it's proven, and it's a matter of encouraging the growth of that technology here in North America.
MR. WISER: Forty per cent of all new vehicles sold in Europe use diesel technology, where they've already switched to the low-sulphur fuel so they don't have the pollution problem.
MR. DEWOLFE: And very often the same cars are sold here under another name but with a gas engine in them and you can't buy the diesel. It's interesting.
MR. CHAIRMAN: Barry certainly brought up some interesting points here tonight. If you would like to further your research, you could forward it to the committee, and we will review it at the end of the day. Do you have any further comment? If not, we will excuse you for the evening.
MR. WISER: Thank you very much.
MR. CHAIRMAN: Ladies and gentlemen, seeing no other presenters, I guess we'll draw to a conclusion tonight. I would like to thank the committee members for their attention and some good solid questions this evening. I would like to thank the presenters and the audience for their patience. This is the first night, as you are aware. We have four other sessions to do, and then we'll be involved in looking at submissions, your approach, your recommendations to complete this mandate of ours. We thank you for coming this evening, good health and we'll see you at a future time. Thank you. Good evening.
[The committee adjourned at 9:14 p.m.]
