TRURO, TUESDAY, JULY 20, 2004
SELECT COMMITTEE ON PETROLEUM PRODUCT PRICING
7:00 P.M.
CHAIRMAN
Mr. William Dooks
MR. CHAIRMAN: Good evening, ladies and gentlemen. We welcome you here this evening. It's nice to see a full house. My name is Bill Dooks, and I'm the Chairman for the Select Committee on Petroleum Product Pricing. We have been ordered, under Resolution No. 1676 from the House of Assembly, to come out and travel across Nova Scotia to find out and to listen to the views of Nova Scotians concerning the price of gasoline and other fuels. At this time, I have the great pleasure to permit the committee members to introduce themselves.
[The committee members introduced themselves.]
MR. CHAIRMAN: Thank you, committee members. At this time I would like to go over just a few short rules of procedure. Everything that we say here this evening will be recorded, so we must remember that. We're going to ask you to come up to the centre, and you can bring companions with you if you wish. Keep your presentation down to 10 minutes. We have a lot of speakers this evening, so I will have to watch the time, because we want to give everyone a fair opportunity to speak. After your presentation, if you wish to take questions, I will open up the committee for questioning. At any time, if you feel uncomfortable in answering a question, just deny the question, and we'll move on to another question or say good evening to you.
1
Another thing, we've been travelling across Nova Scotia, as I said earlier, and we want anyone who's presenting tonight to feel very comfortable in doing that. We've been hearing the message from Yarmouth to Sydney and, as a matter of fact, enjoying the presentations that have been presented to the committee. In saying that, at this time I will ask David Collins to come up as our first witness. Sir, state your name for the record. I will time you, and you have the first 10 minutes.
MR. DAVID COLLINS: My name is David Collins, and I'm Vice-President of Wilson Fuel Company. I made copies of the presentation, so you can follow along and make notes as we go. Since I have 10 minutes, I'm going to try to get through this as fast as possible.
Wilson Fuel Company - who we are. We're the largest independent marketer, we're not vertically integrated, we don't have a refinery, we don't have crude oil fields, but we're the largest independent marketer east of Quebec City. We market heating oil, diesel, gasoline and bio-diesel in all four Atlantic Provinces. We have access to multiple suppliers, including offshore refiners. It's a Truro-based family enterprise, and it's been in business since 1909. I'm currently working with Ian Wilson, who's generation eight in this family business. It's rather unique in Canada, for their ability to do succession.
Moving to the next slide there, gasoline and heating oil - I just wanted to talk about those. They're two very different products from our company's perspective, and I think most of the industry sees it the same way. Heating oil is a delivered business versus gasoline, which is a pickup business. Heating oil has competing fuel sources, which is different than gasoline. A customer can also heat their home with propane, wood, electricity and, in some parts of metro Halifax, natural gas. Just to give you an idea of how competitive that business is, in Halifax there are over 20 companies selling heating oil. They provide a range of services from just simply cash-and-carry all the way up to, mentioned down here further, price caps, keeping your furnace going, automatic deliveries, 30-day terms, there's a whole slew of things for customers.
So customers have a huge choice in that product, and they can also choose not to use that product at all. Also, it has very low barriers to entry. The province has been very wise, you need a vendor's licence, you need a truck, a cell phone, and you can advertise on the community channel. We sell to a lot of these cash-and-carry people on a regular basis. It's pretty easy to get into business. So you have low barriers to entry, a wide range of choices and competing fuel sources.
If you take a look back, why has natural gas not dominated the province? It's for the simple reason that heating oil is cheap. You just can't compete. We wonder at the company what you really need to do, and if you move into regulating heating oil, you could start to strip away some of the services that are currently being offered. At what end? Customers have other choices.
Now gasoline is a different story, and that's probably more on everybody's mind versus heating oil, although heating is indeed a very important thing. We just don't believe it needs to be regulated whatsoever, just simply because there's a good strong competitive market out there. If you look at our prices, there is a range. You go from prices that are 5 cents a litre less than the regulated margins in P.E.I. to sometimes 7 cents or 8 cents a litre more, but there's different services in those products, so it's not just the fuel that people are buying.
In gasoline retailing, what do we have in Nova Scotia? We have integrated oil companies, which are involved in all three aspects of the business, the mining or crude oil extraction, manufacturing or refining, and marketing. Examples of those companies, of course, are Imperial, PetroCanada, Shell, all three of those market here. We also have what are independent refiners, who just refine and market. Irving and Ultramar would fall into that category. Then there are independents, who are strictly marketers. It's firms like ourselves, Co-op, Canadian Tire, Sobeys, a firm called XTR. Firms like that are pure marketers, integrated whatsoever.
In terms of supply, there's been a lot of chat about there being just one source of supply. I think that's somewhat simplistic. This chart talks about that. Product is produced locally in Dartmouth at Imperial, which we all know. Product is also shipped into Nova Scotia from Irving's Saint John refinery. Imperial has what are called reciprocal exchange agreements with PetroCanada, Shell, Ultramar and Irving, where they share production that comes out of that refinery. It's a process that the Bureau of Competition policy has allowed. It's one that's been allowed on efficiency gain reasons, not one for pro-competition. They deem that the loss of competition is so small, but the efficiency gains are so great that it's a better thing for consumers to do. That's been judged by others. It's not one that I personally agree with, but that's what's happened, federally. Product can be imported from other refineries, either through our terminal on Barrington Street or through the terminal, bulk storage tank, at Port Hawkesbury, Statia Terminal. There is some competition from offshore as well.
Just to give the members some understanding, the lowest wholesale prices for gasoline in Canada are in Halifax. They are much higher at wholesale elsewhere in Canada. Maybe we're the best of a bad lot here in terms of wholesale pricing, but it's the cheapest in Canada.
The refiners tend to post what are called rack prices at the refinery gates or at their major distribution terminals; for example, Sydney. Wholesale prices are published and updated daily by several large news-gathering firms: Bloomberg, Telerate, the Dow Jones news wires, they all publish those prices. Some small, independent operators, and most of us as well, are for the most part priced off those rack postings. Rack prices are influenced directly and quickly by world markets, as the product tends to follow the best price.
Who sets the price? Well, the seller of the product sets the price. I mean, I have heard this before, oh, it's one company - well, there are a number of companies selling it and the seller sets the price. The buyers may or may not buy against that price but it's there. Why do the prices go up in markets? Well there are more buyers than sellers. Why do prices go down? More sellers than buyers. It's a really simple business.
What we frequently get is that there are a lot of geopolitical reasons at play which tend to drive the market to have more buyers or more sellers, or you could have a refinery disruption in the United States which would cause the same problem, but basically the price only goes up because there are more buyers than sellers. That is really what we tend to cope with from time to time as we get into panic markets and the market takes off. Sometimes people - like the traders or other companies - tend to get carried away. It is just the nature of our business.
Gasoline is a commodity and you have to remember that. It is sold in commodity exchanges around the world, 24 hours a day. It is sold in the NYMEX in New York, it is sold at the International Petroleum Exchange in London, and then later on at the Singapore Mercantile Exchange. So it is traded around the world 24 hours a day. The price changes literally with every beat of your heart - it is changing now as we chat.
It's a system where multiple sellers meet multiple buyers, so sellers are competing against sellers and buyers are competing against buyers. It is a very wide-open process, it is not an auction, and it is also not directly tied to the price of crude oil. It has its own market and it goes its own way.
The refiners know these prices and use them as a floor price in their negotiations. Because they can sell themselves dry - I mean, they don't have to sell it locally, they can move it in tankers and sell it to the commodity brokers off these exchanges. They tend to then buy locally at the refinery gates by providing value-added. Importers know these prices and, like ourselves, we would know these prices and we establish some competition locally at the refinery gate because they are forced to compete with offshore refineries.
How is it marketed on the street? - which is probably the most near and dear. There is a whole range of the ways that gasoline stations market. There are salaried employees; agents who are on per diem commission; contractor consignment dealers; contract dealers who buy by the truckload; and open dealers. So there are a whole bunch of ways that go on there. It is quite significant. All dealers are not the same. Even though they may be carrying the same size they may be carrying different flags.
Since I have been pushed along, I will go over, flip two pages and say what is included in the price. When a retail operator buys fuel here in Nova Scotia, he buys not only fuel, he buys a credit card system, he buys the advertising, he buys the rewards program, he buys transportation, he buys promotions, a guarantee of supply. He also buys how it is priced,
either at the time of delivery, or at the time that he orders the product weekly. Some of them are on consignment. There are rebates, there are cross-lease payments which are included in the price, and there is also repayment of capital improvement loans that they have received, if any, whereas, an independent operator like ourselves, where you go and hit the refinery gate, we buy fuel. That's it. We don't buy any of the other value-addeds and we are not asked to pay for them.
So it's a question of whether - it's a classic make or buy decision for a lot of these people. Do you do it yourself or do you outsource it to somebody else? They choose the best choice that they have.
At 93.9, how are the revenues split? There's a great chart here and it shows that in the province's - 22.03 - the federal government's 15.07 cents in taxes. Crude oil was 33 cents and a bit, refinery margins that day were 16 cents a litre - that is quite high - and the marketing margins were 7 cents. The 13th was the day after an increase of 5 cents at the pumps. So you can get an idea where marketing margins and total were. They are not large. That is probably, as a province, the aspect over which you have total control, but it is also the smallest part of the piece. It is something that I think you have heard time and time again from the dealers and, quite frankly, I agree with them, the margins are low.
[7:15 p.m.]
Flipping over - one of the big reasons though has been that a rising market does equal low margins, and a falling market equals higher margins. It is quite simple, street prices lag any wholesale price increase, and there is a general reluctance against all marketers to raise their price and incur customer ire. It's not a lot of fun. I mean, when the price goes up, if you get calls, I get a lot of calls. People are not happy about paying higher prices, and as a marketer we understand that.
If you flip through the next charts, there are four charts here which describe margins. These are dealers we sell to. This is pump price less the buy price on that day. Now, if they are a truckload customer, you will see some of these peaks, they are probably trying to flush through high-priced inventory, so you have to look at these with a grain of salt.
You can see that in Yarmouth County the margins have been averaging around 6 cents, once you add back in the rebate structures. In suburban Halifax it has been running about 4 cents. If you flip over again, if you look to one of my stations that is adjacent to a Native reserve, he is barely getting above 2, but that also presents a problem. If you regulate the margins next to him without giving him some tax relief or something to deal with him, you will put him right out of business, because your jurisdiction doesn't extend to the reserves. It makes it tough; it doesn't put you in a good position.
The last one is a dealer in Cape Breton. In Cape Breton it seems to be averaging around - well, they had quite a spike there lately - so about 6 cents again. Those tend to be margins of the dealers we sell to.
I guess the next chart may be of some interest to you. It is the summary of legislation in the United States versus Canada. After you get through those price graphs, you will see them.
There is a Petroleum Marketing Practices Act in the United States at the federal government level. Also the various States - over half of them - have a similar Act as well, and that governs the rules of interaction between oil companies and suppliers. There is retail divorcement in seven States, in Canada we have nothing.
There is a below cost sales Act, General, in 24 States, in Canada, nothing. The below cost sales Act, some gasoline, 16 American States have that, Quebec is the only province to have that. There are six States that regulate around temperature compensation, and maximum price regulation, the United States has nothing there and we have two.
That is a general synopsis. It is our position - if you go to the back end - that regulation can help and it can hurt. I think that is, from our position - and I know that I am running a little bit over - it can help if it repairs the market by installing a component that is missing.
MR. CHAIRMAN: Okay, we are going to allow you a closing comment.
MR. COLLINS: Yes, and that's it.
MR. CHAIRMAN: Yes, okay. So at this time I would like to recognize Charlie Parker, please.
MR. CHARLES PARKER: Thank you, Mr. Chairman, and good evening, Mr. Collins. Thank you for your presentation. I have heard your name lots of times before because you are usually the individual the media goes to for comment on gasoline prices or whatever, within the industry.
You're a wholesaler then, of heating fuel and gasoline. Are you also a retailer?
MR. COLLINS: Yes.
MR. PARKER: I see your name on lots of stations.
MR. COLLINS: Yes.
MR. PARKER: You own some of those?
MR. COLLINS: Yes.
MR. PARKER: As well, you lease some of them I suspect?
MR. COLLINS: Yes.
MR. PARKER: How many stations do you own and how many do you lease?
MR. COLLINS: Well, we don't lease them like the majors do, we just have exclusive supply contracts. We own 20 and we supply, in Atlantic Canada, another 180 outlets.
MR. PARKER: So about 200 all together. Okay. As you are aware probably from the media reports, over the last number of evenings we have had meetings across the province, and we have heard many sad stories of woe from retailers who really feel that their margin is being cut as compared to a few years ago when they felt they could make a comfortable living. But now the margin is down to 1 cent or 2 cents, or 2.5 cents, whatever, and they are not really able to make a go of it. A number have gone out of business, a number of independent retailers. Do you have any comment on that as to why you feel that is?
MR. COLLINS: At deregulation in 1991, there were 942 stations in the province. There are now a little under 500 of them. Back when the province regulated the price, the wholesale to retail margins available at that time - in other words, what a large volume wholesaler like ourselves would pay for a product and what a motorist would pay for it - so that is the wholesale to retail spread - that was running around 14 cents to 17 cents a litre. It now runs about, in a good year, 7 cents. So, basically, half the margins, half the stations. That seems to be a number that is trending downwards, not going up. It still hasn't hit bottom. If we go down to, say, 6 cents, then we could see another round of station closures, particularly in rural markets.
MR. PARKER: A number of retailers have told us that their margins are certainly less than that and out of that they are paying their cost for wages, power, insurance and so on.
MR. COLLINS: Yes. I can only speak to ours. I mean, some of our sites have hit that level but it is not a common everyday level. I don't know what to tell you, other than, yes, margins are poor.
MR. PARKER: What would be your margin then on the wholesale level?
MR. COLLINS: Well, typically, we run less than a penny.
MR PARKER: Is that after all your costs?
MR. COLLINS: Well, after all our costs it is significantly less than that, yes. On a good day we might make as much as 2 cents.
MR. PARKER: So you're buying it from the refinery and you are selling it back out to the retailer, and your margin is somewhere between 1 and 2 cents?
MR. COLLINS: Yes.
MR. PARKER: Okay. Another concern, I guess, we have had from retailers is that - I know there are allowances for transportation but they are paying different prices for the same product, practically, in the same market. Any comment on that?
MR. COLLINS: Well, it depends on what else they are buying. I know in my shop - I mean, they tend to buy differently - some people are buying truckloads, some people want it on a consignment basis, some people want us to install pumps, some people don't. I mean, all that comes out in the wash of the price. If we have made small capital investments - well, not even small - a lot of these sites were in for $50,000 or $70,000. We'd like to get a return on that capital. So that explains, in our case, why the prices are different. I can't explain it for others but that is why it is different for us.
MR. PARKER: I have one final question, if I could. We have heard another concern over retailers telling us that if they wish to get more margin and they feel they have to, they put it up a cent, or a cent and one-half, or whatever. Then, automatically, their wholesale prices go up. Is your company involved with that type of thing?
MR. COLLINS: No.
MR. CHAIRMAN: Thank you, Charlie. Brooke Taylor, sir.
MR. BROOKE TAYLOR: Thank you, Mr. Chairman, and thanks for coming in, Mr. Collins.
MR. COLLINS: No problem.
MR. TAYLOR: You certainly seem to be well-informed on all facets of this particular concern.
We have received a presentation, of course, from the Retail Gasoline Dealers Association which represents some of those 500-plus service stations in Nova Scotia. As you know, as a committee, we are trying to discern whether or not the prices that our consumers are paying are justified. That is part of our mandate. Dealer after dealer has told us that the margin is so thin now that many of them are on the brink of bankruptcy. In fact, last week, at least four service stations that we know of had to close down.
One of the solutions, one of two solutions that the Retail Gasoline Dealers Association brought to our attention as a possible suggestion would be for functional - and I am reading - divorcement legislation, whereby, fully-integrated, multinational oil companies would not be permitted to directly participate at the retail level. They point out that the legislation does exist in a number of U.S. States and in New Zealand and Australia, apparently. What are your thoughts? You are involved as a wholesaler, as a retailer, marketer, what are your thoughts on that solution?
As we are in a time constraint here, my other question is, the other solution that they advanced, and their recommended one, would be to introduce legislation similar to that in P.E.I. to establish a minimum and maximum gasoline margin. Again, this is from the Retail Gasoline Dealers Association. It isn't Brooke Taylor that brought these solutions up.
We have to do some pretty serious deliberations down the road about this particular issue. Keeping in mind what you said about, I think it was something like the price changes with every heart beat, and when the price spikes up, so do a lot of the consumers' hearts, their blood pressure. Just what are your thoughts on that?
MR. COLLINS: Well, with retail divorcement, it depends on what you are trying to fix. In the States, in areas where they involve retail divorcement, the integrated oil companies were exceptionally dominant in terms of actually setting price on the street. In other words, they were running under salaried operations or agency operations and they controlled everything. There was no exchange at wholesale whatsoever.
There is that exchange at wholesale here in this province so it does work in those markets in terms of creating more wholesale competition. That is what they were after and that is what divorcement does. Divorcement increases competition at wholesale.
Now, if that is what you deem to be necessary, that is a more free market approach than simply going the P.E.I. route which is regulating everything. I guess with the P.E.I. regulation the market is always messy and at the end of the day it has always been determined to be the most efficient way to get goods to market and people then have the most choice. We mentioned that about heating oil. But I guess at the end of the day, it is whether you believe that a bureaucrat can be better at that or whether the industry itself is better at that, even though it is not terribly great at it. So, do you really believe a bureaucrat is going to be better at it? I don't think I'm going to be able to convince you one way or another on that one.
MR. TAYLOR: No, you haven't. But just a concern that seems to be prevalent - and this is an invoice, actually, from your company, indicating that the selling price to the retailer for regular, unleaded is 84.7 cents. A retailer in Bridgewater told us - that is another community, of course - that they were paying 90.16 cents for regular, unleaded. I think the distances are somewhat the same from the one refinery, Esso.
I am just wondering, you know, we have heard from retailers that they don't really think that the playing field is all that level. If you look at the definition of price discrimination, it explains that when a supplier is selling to one retailer for one price and another retailer for a different price, that that is price discrimination. That is just in general terms, not bearing in mind volume discounts and what your contractual arrangement is.
Do you see any way of at least levelling the playing field so we have our retailers purchasing the same product for what is essentially the same price, with consideration for transportation?
MR. COLLINS: Well, I think you are going to find that the very low-volume retailers will love it and the higher volume retailers hate it because there is no reflection of efficiency in that. Our customers tend to pay different prices because of different investments and different business methods that we are working with them upon. We sign agreements with them at varying length from month to month, to up to 10 years. It reflects capital investments and it reflects other things, so to sort of say, oh, well, you've got one price here and another price here, well, it could be two different days. It is not really terribly fair of you to sort of throw that out, that we are doing that. I don't think that we are.
We have probably the most flexible marketing. In fact, we are the largest supplier to the independent chains down here, independent dealers. Where the majors have left that market, we are the biggest supplier. We have just a huge range of offerings. In fact, that is what we pride ourselves in, is being very flexible with each customer. Each guy does his own deal. He enters it freely.
At the end of the day, we suggest maximum prices which tend to be consumer-friendly, but those are negotiated with our customers also. The issue is, we don't have them price themselves out of the market.
MR. TAYLOR: So you can't have a level playing field in the general context?
MR. COLLINS: Well, in the general context - I mean, it is level now. Everybody has their ability to run in the market and do what they want to do. I mean, am I on a playing field level with Exxon? Of course not. Is my playing field level here tonight with you seven? No, it's not. It never is. I mean, the issue is what is fair, what is not fair in a debate. If we have seven versus one, it's not going to be, you know, the issue is if you put in that kind of one price fits all, you may run into some unwanted side effects and so you also mandate the level of service and other things that are an outflow of that. You can do it. You can do anything you want, but you may want to be careful about how you move into that because you may have some unwanted side effects.
[7:30 p.m.]
MR. CHAIRMAN: I didn't catch that last comment. Could you repeat that again, please.
MR. COLLINS: Well, what ends up happening is that no playing field in the market is ever truly level. Everybody has a competitive advantage or disadvantage and they tend to apply it. It's just that way.
MR. CHAIRMAN: Before I recognize Howard Epstein, sir, we're not hearing debate per se tonight, we're here to listen to you and to all Nova Scotians and I would just clarify that.
MR. COLLINS: Well, I took some pretty strong exception to Mr. Taylor's remarks and so I'm sorry if I spoke out of turn.
MR. CHAIRMAN: And we'll accept that as an apology. Howard Epstein, please.
MR. COLLINS: And you should.
MR. HOWARD EPSTEIN: Mr. Collins, your presentation was carefully factual. Are you wanting to recommend anything to us at all?
MR. COLLINS: Well, I was cut off before I could.
MR. CHAIRMAN: Sir, the committee afforded you an extra four minutes in time as a matter of fact.
MR. COLLINS: Well, if you don't want to hear it, then you don't have to. I mean I'm not, this is just wild, but anyway. It's there in the thing if you want to hear it you can.
MR. EPSTEIN: Okay, my question was an invitation to see if you had any recommendations?
MR. COLLINS: Yes, I think that there are lots of good role models around regulation. If you want a market, it really can be helpful if you want to reinstall a market component that's missing. The Leader of the NDP tabled Bill No. 80 which is a rather interesting bill and what that does is that restores a natural market arbitrage that dealers always had which was that prior to the involvement of the fire marshal who came in and said that you were no longer allowed to splash-fill gasoline into tank trucks which happened, historically, when wholesale prices got to be higher than retail prices, which is not an infrequent point in case, then those marketers could go to that dealer who was selling and buy from that person at retail. In other words, they were allowed to arbitrage out low retail prices and be able to
benefit themselves by buying at the cheapest spot and that's what member Dexter's bill is doing and that's a natural market arbitrage. I mean that's what people do. They take low prices and move them into areas of high prices. That's what an arbitrager does. So historically that was always available to dealers and due to safety regulations, it was taken away.
So, you know, that's probably a good piece of regulation to put back in because you're actually trying to restore the market back to functioning. It will also create greater wholesale competition which is not a bad thing to do.
If you can regulate to make it easier to get in the market, that's a good thing to do. More competitors equal lower prices.
You could also move to take steps to block further erosion in competition which is what Quebec did, the Quebec model is very much in that mode, but it can hurt if it tries to simply be everything to everyone or try to be the whole market all at once. Advance notice of price increases, well, you know, that is basically organized signalling of one another of where you think the price should go and, you know, arbitrarily low prices, and Newfoundland got into that problem where they set the price so low that some of the communities went dry because no one wanted to go down and lose money.
MR. EPSTEIN: Mr. Collins, I find your analysis of the different points to be very useful but, for example, on this last one though you're giving us pros and cons.
MR. COLLINS: Yes.
MR. EPSTEIN: You're not making a suggestion unless I'm missing it.
MR. COLLINS: Well, you know, Bill No. 80 makes good sense.
MR. EPSTEIN: But is there anything you're endorsing, is there anything you want to come to us and say here is what it is that we think could be done in Nova Scotia?
MR. COLLINS: We think that if you regulate, if you chose to, I mean it always tends to be difficult as a businessman to say, oh, go ahead and regulate us. I mean most of us like to think that we can do without that. The Quebec model probably is the most consumer friendly and in the end the most dealer friendly.
MR. EPSTEIN: Okay, let me try a couple of other things. First, let me just say that although the format this evening, especially because we've got lot of people who want to talk, is somewhat confining to everybody, you shouldn't feel, and no one in the room should feel, that the committee is not open to hearing suggestions and, in fact, we would welcome additional information by e-mail, by letter, you know, to come to the committee. That would
be wonderful. I mean it's true that this format helps a bit, but anything that anyone wants to put in writing including, of course, yourself who represents a company that's a local Nova Scotia company with a lot of history here, we would be very happy to hear from, but let me try a couple of things very quickly.
I wonder why you suggested that the refining margin is beyond provincial control? You said that the only element of the price that we really had control over, apart from taxes I assume, is the retail margin. Why did you omit the refining margin?
MR. COLLINS: Well, I think our refineries are on tidewater and there's no obligation for them to supply, I mean because they can send it to Boston, they can send it to New York.
MR. EPSTEIN: Okay, I understand.
MR. COLLINS: And if you take a look at Halifax prices, I mean the wholesale prices are pretty much equivalent to Boston wholesale prices.
MR. EPSTEIN: Yes.
MR. COLLINS: So, you know, it's not very much money to put it on tanker and move it there.
MR. EPSTEIN: If there were retail divorcement in Nova Scotia, how do you see the marketplace unfolding here?
MR. COLLINS: There would be a sale of gas stations. The value of gas stations would plummet because there would probably be more sellers than buyers, right, and you would end up with more people setting price on the street. So you would end up with more people competing and there would be different prices on the street and I think it would be healthy.
MR. EPSTEIN: The final thing I wonder is whether you have any views or opinion as to why it is that a major player in our local market, Irving's, is not a participant in any of our hearings?
MR. COLLINS: I think they're, you know, probably worried about it and having the same sort of chippy comments come out that we heard tonight.
MR. EPSTEIN: Thanks a lot.
MR. CHAIRMAN: I would like to at this time recognize Danny Graham.
MR. DANIEL GRAHAM: Thank you, Mr. Chairman, and thank you, Mr. Collins, for your informed presentation before this committee. We are here to listen and I think it's pretty important for us to listen to a company with your history and to listen to perhaps the most established home-grown operator in Nova Scotia perhaps with the exception of, I'm not sure, Cunard's, which wasn't in this business before, perhaps you're the biggest operator Nova Scotia has ever had in the petroleum business and I recognize you are also the President of the Canadian Independent Petroleum Association.
We have learned already that your company is the biggest wholesaler of gasoline in the province and I would like to pick up on that. It's important for you to be here in part to respond to some of the things that we have heard from retailers up until now. You're familiar with the stories that we have heard. We've heard stories of families, like your family company, who through generations have been operating successfully and amicably with larger companies, the oil companies, I will say that generically, but are now feeling that the playing field is particularly not only unfair and unbalanced, but oppressive. We heard examples, for example, of Mr. Grace who sells 8 million litres per year down in Bridgewater and when he tries to increase his margin, he says, from whatever it was, 3 cents or so, up to 4 cents, the price to him is increased by that cent so that it shrinks his margin back. We've heard that confirmed by other retailers as well.
I'm familiar with tough bargaining practices, but that, frankly, if it were happening, is oppressive and I'm wondering if you could confirm that your company does not participate in that and if that were going on, you would agree with us that that is an oppressive practice?
MR. COLLINS: No, we don't do that, so first and foremost, we don't do that. I mean it's hard to speak to specifics. I do know that a site that's selling 8 million litres is a highly profitable site. I mean I think that what has happened is that there's, you know, in sometimes making the point there has been a general reluctance to talk about off-invoice rebating which occurs a lot with the dealers and so the invoice is only part of the story and not the full part of the story, but it ultimately finds its way home in the price that they pay.
In terms of Shell's behaviour and to pat wholesale where there's this one for one matching, they would be, I can't speak to specifics but, sometimes some wholesalers - and not this one - take the price on the street and they just basically lock in the dealer's margin at a certain level no matter what it is. So he may be involved in that kind of a business relationship but, you know, frequently that's typically how that happens. I wouldn't sign a deal like that, but some people have.
MR. GRAHAM: There are some specifics and I won't go through all the details of them. We had Mr. Publicover from Wileville appear before us and he actually broke down for us his costs. On $84,000 worth of sales, I believe that his gross margin was in the range of $2,700 for the month of May this year and after employer deductions, before he even paid a
single employee for his mandatory 465 hours, he only had $1,700 approximately to divide amongst those people before he put on the lights, before he paid for insurance and all of those other things.
The sense that this committee has been getting, and that's why it's helpful to hear the balance that you're providing, is that there is a risk, if you care nothing about the fact that these are family businesses, sometimes handed down over generations, but you care about the supply of fuel to more remote parts of Nova Scotia, they are painting a story that suggests that Nova Scotians have reason to be concerned that eventually we will only find fuel in central communities and people from volunteer fire departments and who might be mowing their lawns on the weekend will have to travel long distances to get fuel and that's a concern frankly that this committee has to oversee. Do you see that as (a) a consideration that we should bear in mind and (b) something that might eventually become a concern, that is a more public concern?
MR. COLLINS: Yes. No, the current levels of margins that we've seen in the last six months would tend to indicate that we'll see about 150 stations close in the next four or five years. I mean there's no doubt about that. I think the biggest problem though is that many of these markets in rural Nova Scotia have been trying to post lower prices than the City of Halifax, you know, for whatever reason, we don't know why that's happening. So it costs more to get out there, they're less efficient operators than the city operations. The cities are high volume, very efficient operations. So they're lower volume operations, they're less efficient, there are higher transportation costs, and yet they want to post the same price or less.
Now, 90 per cent of the problem, is more of a revenue case where I think we're still stuck in a bit of a Darwinian price war out there amongst rural dealers themselves trying to get fewer stations. I mean it seems bizarre but if you look at the prices, how many times have you heard, well, how come their price is lower in Digby than it is in Halifax? Well, there's a pretty Darwinian price war going on there.
MR. GRAHAM: I'm getting the signal from the Chair so I'm going to rattle off a few that you may be able to respond to now and you may be able to follow up on.
MR. COLLINS: Sure.
MR. GRAHAM: I would be interested in knowing if you agree with me that most of those what you project, 150 stations perhaps closing in the next couple of years, would be in more remote parts of Nova Scotia?
MR. COLLINS: True.
MR. GRAHAM: Secondly, you indicate that Halifax has the lowest wholesale price of gas in Canada. I would be interested in knowing what the source for that statement is?
MR. COLLINS: Bloomberg.
MR. GRAHAM: Bloomberg. Thirdly, the charts indicating your margins at the latter part of your presentation, comparing Yarmouth and other areas, how were they prepared, and by whom?
MR. COLLINS: By me and basically they are dealers in those locations. Those are dealers we supply.
[7:45 p.m.]
MR. GRAHAM: Finally, could you explain to us the legislative options that you have signalled for the U.S.? You've set some out. We don't know frankly what those legislative options are suggesting. They are, I presume, short of regulation, but still something that's competitive. Can you comment on why we don't have that type of legislation in Nova Scotia, or in Canada it appears, and what might be done short of regulation in your view that would achieve some of the concerns that are being expressed by retailers and consumers?
MR. COLLINS: Well, I think the reason, the Americans don't like full hands-on government, you know, I mean that's a cultural thing for them. So they really are not terribly comfortable about the government setting price and determining supply. So I think what has ended up happening, where they've done below-cost selling laws, is that they're trying to acknowledge that in certain industries, ours being the most prominent, where you have predatory activities that the federal government's predatory pricing law is just woefully inadequate. I mean basically you're allowed to "predate" on somebody as long as you don't 'unduly lessen competition.' Well, what does unduly lessen competition mean? So what ends up happening is in order to mount a challenge under our federal laws, you have to be a big business. Well, big businesses tend not to fight other big businesses. They either tend to get in or get out.
So what they've done in those states is say, okay, we recognize the weaknesses in the federal competition law and we're moving to make it much more - you know, the provincial governments, like the state governments, are much more approachable and they're meant to deal with those issues and so they're saying, no, you cannot sell gasoline below the wholesale rack price in Halifax and that basically cuts that off so that you don't get confronted with deep-pocketed marketing, courtesy of, like some of the big box retailers that show up, that try to price companies out of business so that they can get their sales and raise the price later on.
MR. CHAIRMAN: Thank you, Danny. At this time I would like to recognize Gerald Sampson.
MR. GERALD SAMPSON: Thank you, Mr. Chairman, and thank you, Mr. Collins. I have witnessed you on TV doing interviews and it's a pleasure to see you face to face. I have some confusion around the facts and figures. The gas companies made a presentation and said that the price of crude varied on the market and that had a direct effect. In your presentation you said it didn't. The gas companies showed charts, graphs, figures, very convincingly that at the end of 2003, for the year 2003, Nova Scotians paid an average of 1 cent a litre more than what the people in P.E.I. paid. Last night we had a presentation from the Golden K Club who showed us a differential as high as 9 cents cheaper in P.E.I. than over here on a given day and it averaged at least around 4 or 5 cents on a continual basis.
We have dealers, your figures, you said, I'm looking at Yarmouth, it's almost an average of 6 cents. Cape Breton has an average of 4 cents. We have dealers that were coming, like you say, who were breaking down and giving very heart-wrenching stories, less than 1 cent that they were making, one of them I think quoted us 0.7 cents, and the kicker for the oil companies, I don't know if you're into this or not, was the fact that every time you put it on a credit card, if it was a major credit card that the oil company promoted, I suppose, if it was 2 cents a litre of a charge on that credit card, or 2 per cent, 1 per cent was given back to the oil companies. So they were making off the gasoline, plus making off the charge on the credit card, and leaving the dealer with little or nothing.
So what I'm wondering is, maybe I should ask you for a recommendation rather than ask you, because you have all your facts and figures here according to your records and whatnot, so I would ask you for a recommendation, where do we go with the facts and figures? Whose figures are right and whose are off?
MR. COLLINS: Well, I don't know. If you want to come down and come into the office, I will give them to you directly, if you want, off the computer. I mean it's pretty straightforward stuff. In terms of, I mean crude, of course, is direct impact, but it's really an indirect impact. I mean there's a wholesale price of gasoline. Obviously, if crude oil goes up, it tends to go up in sympathy. There's a high degree of correlation, but it doesn't always matter. So it's its own commodity is what I was saying. So that presentation is not wrong, it's just what you're hearing is, as a buyer, we believe that that's a much better approximation of what's going on on the street, not crude oil. Crude oil is probably not the thing to watch, it's the wholesale price of gasoline which is a separate commodity.
P.E.I. prices being less than Nova Scotia, I market in P.E.I. and, on average, the wholesale-to-retail spread that's permitted by government regulation is larger than we get on the street in Nova Scotia. What tends to obscure a lot of that is in a rising market, which we've had crude go from, in the mid-$20s up to over $40, and the wholesale price of gasoline
go from 80 cents for a U.S. gallon on the commodity exchanges to $1.40, that lag tends to
distort people's point of view. Also, the taxes distort people's point of view. As a marketer, we make more money in P.E.I. than we do in Nova Scotia under the free market.
In terms of the credit card charges, we set up and started our own credit card network for the Wilson brand. Imperial - because we are more efficient than they are - has passed over a large hunk of their business for us to run for them. Part of what we found fascinating is that they are considerably cheaper than the banks, so the dealer is much cheaper than the banks in terms of providing those credit card fees. There is a lot of value out there. Credit card charges are a cost to everybody's business. I mean, you would have to go tackle the banks on that.
MR. GERALD SAMPSON: Finally, then, Mr. Collins, it was recommended last night on regulation that if the low price was to be regulated, that it could go down below a minimum, basically, so if I buy regular fuel it is at a minimum price that it can ever go below so the dealer is probably safe in making a certain amount of money. But the high-end product, the mid-grade or the high-grade, let that fluctuate, let the market determine that price but regulate the low-end product. Would you recommend that?
MR. COLLINS: I would recommend regulating a floor price because it has the net effect of keeping a lot of people alive. You don't have the low-cost selling. That is what is going to drive these guys out as we get more and more mass merchants, faster than anything.
The Quebec model is that model. The Quebec Government has one in now and it is working very well. In fact, I brought along a - you know, frequently, they say that regulation doesn't work - here is a report that shows that regulation does work. It is the Quebec model. It is right here. Unfortunately, I didn't translate but I am sure someone in the government can translate it. I will leave that here with the committee members.
MR. GERALD SAMPSON: Maybe we can have a copy and we will have it translated shortly.
MR. CHAIRMAN: Thank you for your questions. Just before we ask you to wrap up, we would ask Mr. Brooke Taylor for a point of clarification.
MR. TAYLOR: Mr. Collins, you indicated that Halifax had the lowest prices. What commodity were you referring to at that particular time?
MR. COLLINS: Heating oil and gasoline. If you go to Bloomberg on the wholesale rack prices, those are the lowest prices in Canada.
MR. TAYLOR: Okay, I just wanted to concur with my colleague, Gerald, there is a mish-mash of information here because the information we have, it shows Calgary, Winnipeg and a few others, Vancouver, for example, to be cheaper than Halifax.
MR. COLLINS: You're probably looking at - I don't know what you're looking at there. I mean, it's a commodity I watch every day. It's my business.
MR. TAYLOR: Well, look, nobody is questioning your commodity watching, it is just that we have some information. We are not here to offend anybody. We are trying to glean some from you. We are certainly not trying. . .
MR. COLLINS: No, if you go to other sites - the Bloomberg Oil Buyers Guide, Dow Jones, Telerate, Money Line or Platts, you know, they all carry that information. What they are, are refinery gate prices at major centres in Canada, of which Halifax is one, Saint John is another. Where there is a refinery, you will see those prices. That is the price that I am talking about.
MR. CHAIRMAN: Thank you. Your minute for wrap-up.
MR. COLLINS: I think we have covered it all. I am exhausted out of this, thanks.
MR. CHAIRMAN: Thank you. At this time I would call Mr. Roy Pettigrew, please, a business person. We welcome you here this evening. I would just like to inform you that all comments are recorded. Sir, you have 10 minutes for your presentation and then if you wish, we will open up for questions. If anyone else would like to be added to the list, please see Kim, the young lady that is walking down back. Sir, when you state your name, we will start your time.
MR. ROY PETTIGREW: My name is Roy Pettigrew. I am from the beautiful Cumberland County. I understand there is nobody sitting around the table representing that county. I have been in the retail business of gasoline for over 30 years. I would like to take this opportunity to thank you gentlemen for giving us the opportunity to state our case.
As I stated, we have been in the retail business of gasoline for over 30 years. Two years ago, I saw an opportunity to purchase a highway site. I put together a group of investors and we purchased a site very close to the highway. We built a great looking site on Exit 3 in Amherst. In doing so, my wife and I invested our entire life.
This is the first sight that you see, whether you enter or exit the province, depending upon the direction of travel. Every day we welcome thousands of tourists - well, not every day we welcome thousands of tourists but we welcome thousands of tourists over the year and help them make their stay in Nova Scotia a good one. Our site is one of the few new sites with both full- and self-service. We try to make our site as user-friendly as possible and all exits and entrances are wheelchair accessible.
There were oil company investments, of course, and promises of 5, 6, 7 cents a litre. These figures were reality for a while and then the margins began to shrink. Now there are times when we live on 1 and 2 cents a litre and that is the way it has been for most - part of the last year.
We are priced out of the market by major oil companies in our area. These oil companies do business with big-box stores, as we heard in the last presentation. They make deals with big-box stores who also turn huge profits, while the little, independent dealer starves. I have books and records that can back up my statements and I am willing to open them to any one of the members on a personal basis. I don't feel comfortable just passing them around the room.
As we have heard in the past and the last few days, oil companies do make huge profits, and the consumer and the independent dealers are the stepping stones. The public has the impression that we are the bad guys and we are the guys that have got to face the public on the street. The truth is, we are facing them and making very little.
Major oil company outlets and their large controlled network of refineries - and let's not fool ourselves - it is Imperial in Nova Scotia, but it is a large network of refineries - answer to almost no one, while the independent is just a stepping stool. As an independent, we are forced to pay by contract and it is not free. You don't sign on for these things. You are forced to pay by contract to the oil company for credit cards, bank cards and oil company credit card systems. Some of us are even forced to accept their computer system, in which I do, at a reduced cost of $410 per month.
We pay anywhere from 1 3/4 to 2 per cent credit card charges. The oil company cuts deals with the bank and takes 8/10 of a cent, or 1.2 per cent profit from the transaction. This is never passed on to the oil companies or never has been in my experience. If you are a company-run site this is not a factor, it is just another source of income. I do have a break-down of my credit card sales but to cut it short, in my case, 78.9 per cent of all my sales are non-cash related, whether it is debit, credit, bank cards or whatever.
When fuel is delivered, there is a surcharge and that delivery charge seems to vary from place to place or station to station. In my case, I pay 1.9 cents per litre, while some of my fellow retailers tell me they pay none. The oil company, when I ask how much I make per litre, does not see this as a direct cost of sale. If I sell milk or bread, I add the cost of sale in before as a cost.
Most of the dealers behind me can make the same statements of investing in their community, their businesses, with the same results. Also behind me, I see business people who have been in the business for as low as five years and other family-run stations with more than 50 years of service. These people are pillars in their areas and are being pushed out.
[8:00 p.m.]
In closing, I believe it is time that the independent dealer and the consumer stop being the victim. Regulated pricing is good for everyone, including the oil companies. Just look at the huge profits turned by the oil companies in P.E.I., a regulated but smaller market than Nova Scotia, and there is never any question as to whether the price is too high or fair for the times. Yes, sometimes in P.E.I. the price is higher, but as conveyed by Graham Conrad in his presentation the other day, most times it is cheaper.
I can be a good witness to that. As I said, I am the last station leaving Nova Scotia, and when the price is high in Nova Scotia, give me $10 until I get home. When it is lower in Nova Scotia, they fill it up. I can attest, there are more cars stopping for $10 from Prince Edward Island than there are fill-ups.
I know there have been lots of figures thrown around but as an independent, I feel that we need at least 5 cents to 6.5 cents per litre self-serve and maybe 6 to 7.5 cents a litre full-serve in order to succeed. We are not looking for a hand-out, a grant, tax cuts or anything for nothing, just a fair return for our service and a chance to serve the public the way it should be served.
I want to thank you for your time and when you leave here, if you have a heart or a soul, you will go back and strongly recommend regulated prices. They are fair for all. Once again, I thank you. If you wish to ask me any questions, I will answer any that I can pertaining to my own business. I can't answer for the industry, except for some notes that I took. I was in Halifax the other afternoon.
MR. CHAIRMAN: Thank you, sir, for your presentation. We do have a question for you from Mr. Jim DeWolfe.
MR. DEWOLFE: Thank you, Mr. Chairman, and thank you, Mr. Pettigrew, for joining us this evening. I did see you in Halifax the other day, as well. You indicated you were in business for some 30 years.
MR. PETTIGREW: Yes.
MR. DEWOLFE: So you have been around through what we are starting to understand as some of the better days of the past. There were some deals offered, wasn't there, by the companies? I mean, they offered some pretty good deals and incentives back then. We have heard some stories inside the Chamber and during hearings in various towns across the province, and also outside on the street afterwards, and in the restaurants, some examples that were once provided; some allowances for paint for stations, is one thing I heard. There were product give-aways, donations for charities, products for charities, contract renewal bonuses. If you renewed with that company, free replacement of tanks. Pumps were
provided at one time by companies, uniforms were provided, dealers were able to sometimes buy gas for personal use at a discount. All these things helped the retailer and the independent but now they are gone.
As you indicated, you are faced with going in the other direction where you are forced to pay by contract for credit card charges and systems. It is also interesting to hear that 78 per cent of the people are essentially non-cash customers, so you are faced with quite a dilemma. All these deals and bonuses that are gone now, I wonder how much it helped the wholesalers and the big companies. What are your thoughts on that?
MR. PETTIGREW: I guess you would have to ask the wholesalers and the big companies. I don't want to sound like it's a terrible woe here.
MR. DEWOLFE: Well, the dealers must be heard.
MR. PETTIGREW: I signed a contract with a major oil company and I am fairly happy with that contract. The problem that I have is the fact that we based all our figures on a margin of 5 and 6 cents which we were told at the time that that was quite accessible, and that we would be getting that kind of margin.
When you build a station the size of ours and a lot the size of ours, you go to a bank and you make assumptions of 5 and 6 cents a litre, which the company rep at the time told me was accessible. We even had consultants tell us that that was accessible. In fact, I paid a consultant a good hunk of money to tell me that that was accessible.
MR. DEWOLFE: Can I just jump in and ask how long ago was this done?
MR. PETTIGREW: Two years ago. We opened two years ago the end of this month. Since then we haven't seen those kinds of margins.
MR. DEWOLFE: But you did initially?
MR. PETTIGREW: Oh, I'm not going to say we haven't seen them. We have seen them in periods of weeks and, right today, if you were to come to my place today, I would be a happy camper because I am doing well today but I am scared to death of what might happen tomorrow.
MR. DEWOLFE: So it's hard to plan ahead, isn't it?
MR. PETTIGREW: That's right. You know, 30 years in business, I had some good times. I put my kids through school and a couple through college, and everything, built homes. Thank God there is only my wife and I today because the kids - you know, I don't know where they would live (Laughter).
MR. DEWOLFE: Thank you very much. It is obvious that the independents must be hurt by the fact that they don't get all these bonuses and so on, and it must be money in the pocket for the oil companies. You are the one that is taking all the risks out in the front line and they are the ones that are making the profit.
MR. PETTIGREW: We bought all our pumps, all our tanks, we paid for the paint. I mean, there is a contract but it has to be paid back over time. I guess I am not - like I said, I am not disheartened with my contract. I went into that with my eyes open and I can live with it, but the margins, we can't live with.
MR. DEWOLFE: Okay.
MR. PETTIGREW: They are constantly shrinking, as Mr. Collins said. The margins are getting worse and that money is going somewhere.
MR. DEWOLFE: Thank you, sir.
MR. CHAIRMAN: Thank you. I have a further question from Gerald Sampson.
MR. GERALD SAMPSON: Thank you, Mr. Pettigrew. Just some information and then a question. Gas representatives that addressed us in the House the other day said that there were no guarantees in any business and the days of selling gasoline only to make a living were gone, that it is almost necessary today for a profit, for a garage to have a car wash or convenience store. Do you have either one of those?
MR. PETTIGREW: First off, it is funny you would mention that. I put some comments down and I actually spoke to that gentleman afterwards because he does represent our company. We do have a convenience store and we do sell coffee but I sell maybe 50 or 75 cups of coffee a day and I sell 10,000 litres of gas a day. I signed my major contract with a gasoline company, not with a c-store or a coffee company. I have to make money on fuel to survive. It is hard to make money on a little bit of coffee. I mean, it's all a supplement and it all helps. Again, car washes cost money and if we are not making money it's pretty hard to spend money.
MR. GERALD SAMPSON: You have heard other independent dealers saying that 5 cents a litre would be a minimum and the gas companies thought that that was a very high price to have to pay, and owning your tanks, also, you own the liability now that goes with them. That is information that has come forward from the gas companies. That is why they allow you to own the tanks and they don't anymore.
MR. PETTIGREW: That's right. The last oil company that I was with, they owned the tanks and then it came to a point where if I wanted to sign a contract at all, that I would have to own the tanks. That gentleman who talked about the coffee the other day, too, also
made a comment that 1.5 or 2 cents per litre profit would be good. He and I talked. He came to me, I didn't go to him. He came to me afterwards and I agreed with him on that. If we could make 1.5 or 2 cents profit, not per litre, but profit, that would be fine. Keeping in mind that profit comes after expenses.
MR. GERALD SAMPSON: Yes, thank you sir.
MR. CHAIRMAN: Thank you, Gerald. I recognize Howard Epstein.
MR. EPSTEIN: I didn't hear what your annual volume was.
MR. PETTIGREW: My annual volume this year will be 2.6 or 2.7 million litres.
MR. EPSTEIN: In the 30 years that you've been in the business in Cumberland County, can you just tell us the change in number of retail outlets in your county? Any idea how many are left now?
MR. PETTIGREW: I know my old station is gone, I can count five very quickly that I've seen disappear just within a mile or so radius of myself.
MR. EPSTEIN: Within what period?
MR. PETTIGREW: Within 30 years.
MR. EPSTEIN: Within 30 years. Okay, thanks a lot.
MR. PETTIGREW: But, most of them have disappeared just in the last 10 years.
MR. EPSTEIN: Okay, thank you.
MR. CHAIRMAN: Thank you. Charlie Parker, please.
MR. PARKER: Thank you, Mr. Chairman. Our previous presenter mentioned the words, invoice rebating. In other words, a rebate comes back to the retailer over and above any margin that you might be getting. Is that a common practice in the industry and are you affected by that?
MR. PETTIGREW: Well, we hear about this. I have a cross-lease. The oil company put money up front to help invest in our property, which helped us pay for some of our equipment and necessary work that we had to do at first. But this doesn't come free, this has to be repaid. They give you the money up front and then they take it back as X number of cents per litre over a period of time. Granted, it's interest free.
With me putting the tanks in the ground and me putting the pumps on the island and the building of the building, it's part of the real estate investment. It really should not enter into the cost of gasoline. It's written in our contract how much per litre they're going to take back or give us. It's a real estate issue and something I feel that is part of the reason I put their sign out front. I don't have to have their sign out front. I switched companies for that reason. We keep hearing about how hard it is and how this should come out of their margin, but it's really not part of that. It's a real estate issue.
MR. PARKER: Okay, so you're not really getting a rebate back then?
MR. PETTIGREW: We get a cross-lease whereby if our volume reaches a certain amount, we'll get a little more from the oil company. But, as I said, this goes back to them for the use of our equipment and that type of thing. We do get a rebate, yes. I wouldn't go on record as saying we don't get a rebate, we do get a rebate.
MR. CHAIRMAN: Thank you. Sir, thank you for your presentation this evening. We certainly have enjoyed you and wish you well in the future.
MR. PETTIGREW: Thank you.
MR. CHAIRMAN: At this time, I would like to call Henry Overmars. You'll probably have to correct that pronunciation.
MR. HENRY OVERMARS: That's perfect.
MR. CHAIRMAN: Oh. Thank you. Sir, I have to remind you that your comments will be recorded this evening. You have 10 minutes to do your presentation and maybe the gentleman can introduce himself. You have the floor as soon as you introduce your friend and give your name for the record.
[8:15 p.m.]
MR. OVERMARS: Thank you very much. My co-partner here is Bernard Kavanagh, he runs a service station in Canso. Myself, I run a service station in Lower South River just outside Antigonish. I've been in business since 1977. I was in the regulated market up until 1992.
What I would like to see is some kind of a regulated minimum/maximum margin so at least at the end of the day or at the end of the year we can project an income of some sort. In today's market, we have no idea, some days we're making a cent a litre, some days we're making none, some days we're making 6, 7, 8 cents on a good day, on a good day we may at times make 8 cents, but that's very short-lived. Our cost of gas changes daily, but the retail doesn't ever change. We, as independents, own and operate a service station, we pretty well
have to follow the major players. They're the ones that set the price. A company-owned/company-operated service station, we spend a lot of time running up and down the road watching the market. Nobody tells us to put our gas price down, nobody tells us to put it up, we just have to follow the leaders in the business.
There's a lot that I would like to see. It would be 5, 6 cent minimum margin on self-serve. There are a lot of expenses involved in our business. We absorb credit card charges at 1.8 per cent. I'm under contract with Wilson's to sell Esso gas. That's who I have a contract with and our credit card charges are 1.8 per cent, debit cards are 10 cents a transaction. My credit card charges alone, I think last year it was $26,000 on $1.45 million in sales on credit cards. That's a major expense for us. It's almost one-half a cent a litre at my volume.
The cost of power to operate a service station. My power bill for a year is almost $20,000. The majority of that is gas related. I operate service bays, a small convenience store. On $3-point-some million of sales and you make very little money on it at the end of the year, it gets pretty discouraging. I'm not here crying that I'm not making any money; I'm making money at my business, but I'm not making it on gas. I've diversified over the years, I'm into towing and I expanded the convenience stores and I do very well on the bay work, but why be open 18 hours a day, 7 days a week and not make any money at it? I may as well go to work at 8:00 a.m. and shut the bays down at 6:00 p.m. and go home.
To find good employees and pay them minimum wage is very hard to do in this business. In order to keep good employees, you have to pay them $10 an hour. The money is just not there to pay somebody $10 an hour to pump gas. If anybody thinks that pumping gas is an easy job and a no-brainer job, I'd like to have them out there at the service station for a day to do the job and do it correctly and not mess up credit card sales. It's a constant battle. I had four bright, young kids quit after school was done so they could get a $10 an hour job in the woods trimming trees or to do this or do that. Try to find young people to do a job and train them, it's not something that you can go in there and start at 8:00 a.m. and do it. We have to have employees to go in there that take two or three days' training.
We absorb the cost of drive-offs. The higher the price of gas is, the more people that drive off without paying. I had $12,000 in security camera systems in there. Now we can get licence plate numbers, but the RCMP won't give you any information due to this new . . .
MR. CHAIRMAN: How many drive-offs would you have in the run of a year?
MR. OVERMARS: I have copies of just three in the last two months.
MR. CHAIRMAN: How many?
MR. OVERMARS: Three in the last two months. At $30, $40, even at 5 cents a litre,
you have to sell 600 litres of gas to recoup that. But if you have licence plate numbers and the RCMP can't give you the information of the registered owner of the vehicle, it doesn't help you any. They will eventually get it. That's all cost to us.
MR. CHAIRMAN: Are you finished, sir?
MR. OVERMARS: I'm pretty well finished, unless there are any questions.
MR. CHAIRMAN: Yes, we have a question for you. Brooke Taylor.
MR. TAYLOR: Henry, thanks for your presentation. Do you sell diesel fuel as well?
MR. OVERMARS: Yes, we do.
MR. TAYLOR: What are you presently selling your diesel for, at the pumps?
MR. OVERMARS: Today it's 78.9 cents per litre.
MR. TAYLOR: And what is your regular unleaded full-serve?
MR. OVERMARS: Today, 93.9 cents.
MR. TAYLOR: People in the industry, and maybe even Mr. Collins, might agree that there's very little difference in refining a barrel of diesel compared to a barrel of gasoline, or a litre of each. But, yet, there's a big significant difference in the price at the pumps, and that varies, too, from station to station. Some folks in the oil industry seem to get their hackles up when we ask questions about levelling the playing field. You and the Retail Gasoline Dealers Association are advocating some form of regulation. We are to consider all the presentations that we hear during the course of these hearings, plus there are briefing sessions and things of that nature.
In your view, if a margin was guaranteed to you and every single retailer in this province, it certainly would not only make your operation profitable and stable, but would not the consumers, the people who pull up to the pumps, wouldn't they also not have to be hit with these sudden price spikes and the uncertainty of 91 cents today and 95 cents tomorrow? From your perspective, what have you been hearing from the consumers at the pump?
MR. OVERMARS: Every time it goes up, yes, we always get complaints, but that soon quiets down. Once it got up to 99 cents, our highest price was 99.9 cents, like most of the province was, I think, back in early May. Sure, we get lots of complaints and upset customers, but there's nothing we can do about it.
MR. TAYLOR: When you buy a truckload of fuel and put it in your storage tanks, what are the terms as far as payment goes? Is it C.O.D., is it five, 10 days? Maybe you said earlier, I apologize if you did.
MR. OVERMARS: I buy tankerloads at a time, 54,000 litre loads, usually, and my arrangement with Wilson's is that credit cards are deducted off - accumulated credit cards from the last load to the load I ordered are deducted, and my bank account is debited, usually the following day after I get the load.
MR. TAYLOR: When you put that product in the ground, in your storage tank, and the price is whatever that price might be that day, does that price change before that 54,000 litres is pumped through the pumps?
MR. OVERMARS: No, I always get information, usually daily, faxed from Wilson's what my cost of gas is going to be the following day.
MR. TAYLOR: But as far as the consumer is concerned, if you bought it at a particular price, can that price change in mid-flight, so to speak? Maybe you've had 30 per cent of your tank emptied, and then the price is . . .
MR. OVERMARS: Oh, sure. It could change at any time.
MR. TAYLOR: But your margin doesn't change. Does your margin change as well?
MR. OVERMARS: My margin changes if I buy it at one price today and the price goes down tomorrow or up tomorrow, yes, my margin changes.
MR. TAYLOR: We did hear from some retailers who said the margin stays the same if it's 93 cents.
MR. OVERMARS: No, I think that's the different arrangements different oil companies have with . . .
MR. TAYLOR: Yes, I believe it was, too.
MR. OVERMARS: Some of them are on consignment. If they're on consignment, yes, their margin stays the same.
MR. CHAIRMAN: Frank Corbett.
MR. CORBETT: If you don't mind, I would like to ask Mr. Kavanagh a few questions. Your garage is in the Town of Canso?
MR. BERNARD KAVANAGH: Yes, it is.
MR. CORBETT: I'll ask you a couple of questions. We can move along fairly quickly here. We know about the economy, obviously, in the Town of Canso. So I just want to know, in recent years, how many service stations have closed in that area, and the impact of you getting your supply, because it is a fairly remote community, and whose flag do you fly at your station?
MR. KAVANAGH: First of all, I fly Wilson's flag. In the last, say, 10 years, there's been a station in Hazel Hill closed, Little Dover closed, a station in Half Island Cove now only sells regular gas, it used to sell diesel and supreme, and a station in Larry's River only sells regular gas as well. That's in the last little while.
MR. CORBETT: My third question is about the idea of you being in a remote area. How does this affect - Mr. Graham had mentioned before about volunteer fire departments from various areas not having gas accessible to them. Do you see similar things happening in the Canso area?
MR. KAVANAGH: Yes, definitely. I have a little presentation here, as well, which deals specifically with that, actually. The supply of our gas, we have to book the truck two days in advance in order to get it in. It's more like a crystal ball thing, because my volume is not that high. We have a couple of underground storage tanks for regular and one above-ground for supreme and diesel. We have to sort of try to figure out when we're going to run out of that, or when we're not, in order for it to be delivered.
MR. CORBETT: I'll let you go with these short ones. What is your volume and have you ever run out?
MR. KAVANAGH: I've definitely run out, numerous times. My volume is a little over 1 million.
MR. CHAIRMAN: Gentlemen, any closing comments? Danny Graham.
MR. GRAHAM: Mr. Chairman, I just thought that Mr. Kavanagh may have wanted to make a presentation of sorts. I just had one question for Mr. Kavanagh. How many stations are in Canso, and what's the risk that one or more of them may go out, what's the risk that Canso may not have a gas station?
MR. KAVANAGH: There's one station in Canso.
MR. GRAHAM: That's yours?
MR. KAVANAGH: That's it.
MR. GRAHAM: Are you prepared to answer the other part of that?
MR. KAVANAGH: It's quite possible, yes, that it could go out.
MR. GRAHAM: What are your margins right now?
MR. KAVANAGH: They vary again from delivery to delivery, but some days you're looking at 2 cents, 3 cents . . .
MR. GRAHAM: On a million?
MR. KAVANAGH: . . . 5 cents or 6 cents, for sure.
MR. CHAIRMAN: Sir, would you like time to deliver your presentation.
MR. KAVANAGH: Sure.
MR. CHAIRMAN: You have the floor. Please state your name for the record.
MR. KAVANAGH: Bernard Kavanagh, Canso Garage Limited. I just want to take this opportunity to thank you for hearing us here at this hearing. I know you're probably tired of talking about numbers and profits and margins and all this. Basically I'm going to speak about coastal communities and the effect that it's having on those, specifically that of Guysborough County.
First of all, there's no self-serve stations in Guysborough County at all, none whatsoever. So any of the gas prices that are posted are usually showing at least 2 cents higher than anywhere else. It's just the fact that they're not self-serve. Probably, I don't have any numbers, but I'm sure the majority of the rest of the coastal communities around Nova Scotia are the same way, that the volume is not there and they don't have self-serve pumps.
There are areas along the coast where there is only regular gas available, no supreme and no diesel in any areas. From Canso to Guysborough is about 30 miles, and that's the closest for any supreme in that direction, and in the other direction towards Spanish Ship Bay, again, there's some regular available, but no other grades of gasoline or diesel.
[8:30 p.m.]
There's an incident where one of my mechanics lives in Charles Cove. It's a small community up the coast around Whitehead and that area and he drives vehicles that require supreme gas. So he's got - and had it long before he started working for me - a tank in his yard where a local supplier brings him in supreme gas and he just puts it there and pumps it off into his car because there's none available in that area. Back about two or three months
ago his tank was starting to leak so he called his supplier, just a local oil company, whatever you want to call it, that doesn't supply retail gas to anybody, just home fuel or whatever, he got a new tank from them and a supply of supreme gas from them as a retailer at approximately 3 cents cheaper than what I was buying it during that time.
Another facet of coastal communities is where people have to buy their different products out of town, where they go out of town for different things: doctors' appointments, groceries, clothing, et cetera. So when the price of gas is known in town and here it's 2 cents or 3 cents higher than what it is in town, or they've got to go to Antigonish or somewhere for other products, they'll come up to the tank and so, okay, give me $5 or $6 to get me out of town. So they're taking all of their business as well as they go out of town and then when they come back in town, they're filling up with the self-serve stations or the lower price gas to come back in town - another deterrent I guess to the coastal communities.
Another thing, as Mr. Graham had mentioned, about four-wheelers, pleasure craft, lawnmowers, whipper-snippers, anything of that nature, a lot of those products require supreme gas in order for them to work properly or whatever. So what you're seeing is the people in coastal communities who are 30 miles or 40 miles away, they are bringing their jerry cans in and just filling up on supreme gas to run these things that we, or other people, just take for granted, you know, that they just walk a couple of feet or so and fill them up where they have to plan and have a bigger expense to have this happen to them.
Another thing is tourism in the coastal communities. We'll have tourists or big Winabagoes will come to the station or whatever and they will never say fill it up. They will look at the price and whatever, it's just not a fair playing field for any of those areas at all. The other thing, the next question is, well, where's the next gas station and if it's not in their direct route, or if they want to go along the coast, they won't do that if they know they can't get the product in that area. So I mean we're missing out on that as well and it just keeps the tourists into the main stream of the Trans Canada Highway, or whatever, and away from the different coastal communities. What's written on our licence plate - Canada's Ocean Playground - Nova Scotia is supposed to be that and I feel that it has been suffering very much from a lack of use and the lack of use is because of the unavailable resources that are around Canada's playground. Thank you very much.
MR. CHAIRMAN: Thank you, sir, for your presentation as well and we thank both of you gentlemen for travelling a long way this evening to tell your story. So we wish you success in the future. Good evening to you.
At this time I would like to call witness Ken Wootten and I believe, sir, you've travelled a long way as well. How was your flight?
MR. KEN WOOTTEN: It was good, thank you.
MR. CHAIRMAN: Sir, you've been in the audience this evening. You know the rules and procedures?
MR. WOOTTEN: Yes, I do.
MR. CHAIRMAN: So you would state your name for the record and, sir, you have 10 minutes for your presentation. If you so wish to take questions, we would open up the committee for you.
MR. WOOTTEN: Thank you. My name is Ken Wootten. I've come from Burlington, Ontario, to speak with you. I own a company called XTR Energy and XTR started actually in Nova Scotia about six years ago. We have since grown in five provinces across Canada and have over seven of these facilities under our banner. We only sell fuel to independent owner/operators. We do not operate any facilities or compete against our dealers directly. They are the lifeblood of our company and, therefore, ensuring their long-term viability thereby ensures ours. We've grown the business by being very efficient in regard to how we go to the market. We use the Internet as a major component of our business model. We manage our entire network of 70 facilities with two people. So we have a cost structure bar none - the lowest in the industry.
As we have continued to grow across Canada, we see a lot of different situations occurring out there in the marketplace. Most of the facilities are being squeezed as it relates to market situations and market conditions and virtually all of our facilities are located in rural markets. So much of what you've heard tonight, and I'm sure in the previous five nights, all relates to individuals operating in small rural communities. They are the lifeblood of those communities in many cases. They're an integral part of the community and an integral part of the commercial landscape in those particular markets. That's really no different as it relates to the XTR sites here in Nova Scotia. Eleven of our facilities are the only remaining gas station in their communities. So if they close, those facilities will not have gas anymore.
They've been through a tremendous challenge as it relates to the first half of this year and the margins and under our company policy, when our dealers are under stress as it relates to their margins, we also go under stress and we go down in our cost as it relates to supporting them and so for the first six months of this year in Atlantic Canada our company didn't make any money either. Fortunately, there has been some rebound in the marketplace, but clearly any extended period of those kinds of margin collapsing will not only destroy those individual dealers in the marketplace, but will also eliminate for the Province of Nova Scotia, really, one of your growing wholesale accounts here in the marketplace.
XTR buys product from the major oil companies much the same as you heard from David in regard to the Wilson's approach. For the most part you deal in a relatively controlled market. We really only have two refineries in Atlantic Canada. Those two
refineries produce more fuel than the market needs and much of that fuel gets exported offshore. So we actually have a good product supply and demand balance which is something to keep in mind as you think through what is the right approach for this market opportunity. People will talk about supply and demand pushes the street price up. Well, we've got ample supply and the demand really doesn't change year over year if you look at the total consumption by the province. So it certainly leads you to ask some questions about pricing and activities in the market.
We, as a company, try to position our product and our company in a format whereby the independent operators can perform and provide services much the same as a major oil company, but not do it with all the associated costs and that's really our format. So we provide POS, credit card solutions, uniforms. We provide them with branding, we provide them with a limited amount of investment and we provide them terms as it relates to their fuel and I take the credit risk. Typically we offer them a 10-day term solution and if they are unfortunate and don't make it in the marketplace, I'm often left holding the bag as it relates to their account and, therefore, we are always constantly on watch to try to help our retailers find new ways to generate new revenues in the marketplace and we've introduced programs to them in the past for them to lease slushy machines, or get into the coffee business, or whatever.
Many of our sites and virtually all of our sites here in Nova Scotia came to us from another brand, typically a major brand. They typically have been with that brand for a long period of time and were no longer considered strategic or important as it related to that brand and, therefore, were left without a supplier. That's really where a lot of our growth has come in the marketplace. We've kind of come in, I guess in the early days as a small company, as a supplier of last resort. We've brought the product to the marketplace and tried to provide solutions to help them stay in business. I guess our continued growth in this market is a reflection of our success. Today we compete against all the other brands in the marketplace, all the major brands, as well as Wilson's, in regard to securing new accounts and account development and we continue to secure accounts here in Atlantic Canada.
One great concern that we have as a corporation is some of the legislation that is in the marketplace today and our concern specifically would be in regard to the P.E.I. legislation. We cannot afford to compete in P.E.I. So if your recommendation is to put the P.E.I. legislation in Nova Scotia, this will be the last you'll see of me. So keep that in mind.
Our marketplace is very difficult and complicated, yet simple, all in the same arena, which makes it such a difficult one to deal with. It's really a tightrope. You need to provide protection for both the stakeholders, as it relates to consumers, you need to provide protection for the facility operators and you need to provide protection for the suppliers and the wholesalers and really I guess my greatest concern is if you go in and disrupt any one component of that marketplace, it will disrupt the competitive landscape. It will disrupt the economics of our marketplace and it will disrupt the economic viability potentially of those
people who you're working so hard to protect. So I guess my short-term advice is before making any recommendations, make sure you've looked at all facets very clearly.
Any solution must really provide some protection for the dealers as it relates to their margins. You've heard from many of the dealers in regard to what they think the right number is. They went through an exhaustive process in Quebec to determine a mechanism to try to find what was fair. They go through an annual review in that regard. I think, if you were to head towards a legislated solution here in Nova Scotia, that you should spend a significant amount of time studying the Quebec model to see if that model will work for your purposes. It has worked well in that market. That market does have the largest percentage of independent petroleum brands of any market in the Canadian landscape and it has been in place now for a few years and the feedback from the independents seems quite positive.
One concern and one point of confusion that you may be running into are the terms, cross-lease and guarantees and couponing and discounting. Certainly as you look at the margin and the guarantees that you may look to put in this marketplace with legislation, make sure you clearly understand cross-leases, guarantees, and there was a new term tonight I hadn't heard before, off-invoice discounts. We, as a company, don't provide any of that to our facilities. Our facilities get a price and that's their price. They go to market on that. We don't provide guarantees to them, we don't provide cross-leases, but those are all mechanisms that in my opinion destroy competition in the marketplace because it gives unfair advantage to specific facilities. So if you end up settling on a format providing guarantees, those guarantees should be reduced by the amount of those cross-leases for those particular players to ensure that you are building a level playing field in this marketplace.
I mentioned earlier that it's simply a complicated, really simple industry. The product comes in as crude. It gets put through a teakettle and turned into fuel. It gets delivered through a transport truck to a facility in a community. I mean, how much simpler can it get? But then you get into the complicated side of our business and that is really that we deal with four different levels of margins. We have crude margins, we have refinery margins, we have wholesale margins, we have retail margins. Then in addition to that, you've got world market movement and a large number of people who invest on the Mercantile Exchange who are doctors and lawyers and dentists who don't have anything to do with the industry that move the price around on a day-to-day basis, and then if that wasn't confusing enough, we have the exchange rates to deal with in both the U.S. and Canadian dollars.
As you move forward, I would like to offer XTR if you feel we can help in any way in regard to providing information on the industry, participating in any advisory boards that may come forward. We, as a small stakeholder in the Province of Nova Scotia, look to work and provide as much information as we can to help you protect the dealers here in this marketplace who are our lifeblood.
MR. CHAIRMAN: Thank you, sir. I will open up for questions and I would like to
recognize Brooke Taylor.
MR. TAYLOR: Thank you, Mr. Chairman, and thanks, Mr. Wootten, for coming in.
MR. WOOTTEN: My pleasure.
MR. TAYLOR: I believe we may have had one of your customers in on Friday over in Halifax making a presentation to the committee. How many customers or retailers do you have in Nova Scotia?
[8:45 p.m.]
MR. WOOTTEN: We have 20 at the moment, I think 21 next week.
MR. TAYLOR: What's the average margin? I know you said in your presentation, but I believe the gentleman from Cape Breton, more especially Inverness, claimed his margin varied from 7 cents to 14 cents.
MR. WOOTTEN: That's a pretty good margin.
MR. TAYLOR: Yes, based on what we've been hearing.
MR. WOOTTEN: We deal and we really work with our dealers to try to provide them with market intelligence as far as what we understand is happening in the marketplace. They price the product and own the product themselves so they can set their own pricing. I really would have to go back and look at his specific numbers, but my only point would be that we don't carry the overhead that our competitors do and, therefore, in order for us to cover overhead costs, we don't need to charge nearly as high a markup.
MR. TAYLOR: Regarding price adjustments from your perspective that are not crude oil-cost related, what other inputs do you have to give consideration to, besides the price of crude, the price you are charged as a wholesaler, what other inputs do you have to give consideration to?
MR. WOOTTEN: As it relates to pricing at a dealer site?
MR. TAYLOR: Yes.
MR. WOOTTEN: The majority of the components that we would be involved with from our company's perspective, we would have capital investment, much the same as David mentioned from Wilson's, and we recover that investment over the term of the contract. So if it's a five-year contract, you know, then you take the cost of the asset and you divide it through. If it's a 10-year contract, the number gets smaller. So, therefore, the retailer has an
advantage to going on a longer term arrangement. The credit card charges, of course, we pass those charges on to our network at cost. We make no profit on those. The only other cost that the dealer would have is cost for uniforms. The main one really is the capital investment side.
MR. TAYLOR: Is there any disparity in the price that you charge your dealers if you're buying the product for a given price and of those 20 stations that are buying on the same day or at the same time, are there some standards that you have to give consideration to that's relative to, you know, your wholesaling company or do you charge a price pretty much that's even?
MR. WOOTTEN: No, as I mentioned to you, we actually pay a fair bit of attention to our dealers' livelihood to ensure that they're making a reasonable margin in the market. Hence the reason why we, as a company, did not do extremely well here in Nova Scotia for the first six months of this year. So we do look at that. We do talk to them about margin activity and we price them on a net basis on a day-to-day basis. They would all be priced differently anyway due to different capital investments, different delivery costs, things of that nature.
MR. TAYLOR: Now, you said you couldn't operate in P.E.I. in that particular regulated market. Is it just the cost of operating there and breaking into the market or is it because it is regulated?
MR. WOOTTEN: The problem that we've seen with the P.E.I. regulation and Dave actually alluded to it, I thought quite well, and that is that it either lags or follows the market movement. Therefore, you've got to be a fairly sizeable company to be able to afford the lag, especially in a rising market. So the time for me to enter P.E.I. would be as soon as I think crude has hit its spike and then I could hop in and I could enjoy the ride back down, but I certainly couldn't afford the ride up because of the nature of our business. We don't have the financial capacity to do that.
MR. CHAIRMAN: Thank you, Mr. Taylor. Danny Graham.
MR. GRAHAM: Thank you, Mr. Wootten and congratulations on the success that you've had in growing your company and being as industrious as you have to eke out a market. I think it's a reminder of how the market can and should work in some respects and I think I'm interested in seeing that one of your focuses is on protecting, and probably not your central motivation, but it is the niche that you've carved out that you protect those who are vulnerable in a sense by providing them with a supply that is at a favourable margin compared to your competitors. I am interested in the point that Mr. Taylor just picked up on and that is that you don't feel that you would be able to compete with respect to the P.E.I. market because of the lag and because your pockets aren't deep enough to absorb the lag essentially. I'm wondering, despite the congratulations that I extended, whether or not the retailer would continue to be in operation - in your estimation - if we were providing a Prince
Edward Island type model. They would just have a different wholesaler.
MR. WOOTTEN: I guess the answer I would provide you on that is that of the facilities that we've brought on board, many of them had been abandoned by their supplier. Therefore, we came in as the supplier. One might suggest that some of those facilities might not be here today if we hadn't - in the case of say, the Cabot Trail - built a trap line of deliveries. Small deliveries, 8,000 litres, 7,000 litres a site, 5,000 litres in some cases, just enough to get people by through the Winter, once-a-week deliveries. We fortunately have built that network up into a grouping of five or six sites now that we can fill up a full truck and have it run the trail and drop off, almost like a milk run, to satisfy their requirements.
MR. GRAHAM: I'd like to sort through as best as we can in the short time that we have what you would consider to be the ramifications to the overall market - not just to yourselves - if we were to move just to a dealer/wholesaler regulated system. That's my first question.
Related to that, could you tell us whether or not the Quebec approach provides for some level of price smoothing? Perhaps I could just deal with those two questions first.
MR. WOOTTEN: Your first question was in regard to . . .
MR. GRAHAM: Just doing dealer/wholesaler regulation, not doing the retail regulation. If one were to approach this from the perspective of regulating just the relationship between the dealer and the wholesaler, what do you think the impact of that might be?
MR. WOOTTEN: Well, I buy from the major oil companies so depending on how that legislation came down, that would either allow me to make a reasonable living, allow me to make too much of a living, or allow me to make no living. So it's really a function of how the numbers come together. My buying price from the majors is less than their cost of production, obviously, so they have a distinct advantage on price as it relates to how I buy product.
So, the answer to your question is, yes, it could work. Again, back to my earlier comment of making sure before you put any of that in place, you've really understood cross-leases and guarantees and the market activity all the way back to the refiner. Today we have a situation in Ontario where the market swings weekly, anywhere from 12 to 15 cents a litre at the street.
MR. GRAHAM: My second question was about whether the Quebec model provides for some type of price smoothing so that people are able to budget, there's not abrupt changes. I'll finish with a question that I intended to ask earlier on of Mr. Collins and it relates to the margins that exist in home fuel. I'm wondering, as a wholesaler, whether you
know if the margins in the home fuel industry are more generous to suppliers than they would be in the gas industry to those supplying gasoline?
MR. WOOTTEN: In answer to your first question on Quebec, I'm not sure if there is within the legislation a smoothing written, but the result has been a more smoothing effect in the marketplace.
With regard to your second question, I'm not in the heating oil business today. I have been in the past, but I think those questions would best be directed to your heating oil wholesalers here in the marketplace.
MR. CHAIRMAN: Thank you, Danny. I recognize Charlie Parker.
MR. PARKER: Mr. Chairman. I just had one question. Listening to your presentation, you had some different approaches to business than perhaps we've heard from other oil companies. It seems as though you care about your retailers, for starters, you're really concerned that they make money, that they make a decent margin and help them with their credit cards and so on. A refreshing approach than what we have been listening to. Your motivation then for being in business, usually it's certainly to make money, I guess that still is your motivating factor, but are there other ancillary objectives? I'm just curious.
MR. WOOTTEN: I started XTR in 1999 with the objective of building Canada's only privately owned national petroleum company. I'm halfway there.
MR. PARKER: How many retailers do you service across the country?
MR. WOOTTEN: Just a little over 70 right now.
MR. PARKER: How many in Nova Scotia?
MR. WOOTTEN: There are 20, and approximately 20 in New Brunswick. I started here in Atlantic Canada in 1999.
MR. PARKER: Okay, well, all the best.
MR. WOOTTEN: Thank you.
MR. CHAIRMAN: Howard.
MR. EPSTEIN: What do you think about retail divorcement?
MR. WOOTTEN: Interesting concept. I have a number of good friends and acquaintances in the U.S. that are in markets that have that. It seems as though it's the last stage of not being able to solve a market problem, in my mind. I welcome it for the independent owner-operators, but not being able to actually see how divorcement would clearly work, I'm somewhat nervous about the impacts it might have on the marketplace.
One difficulty that divorcement would clearly provide is it would force all of the integrated refiners here in Canada to become out of touch with the marketplace. You'd certainly have to have some regulations that went back to crude oil pricing that brought it forward to the street and maybe provided legislated refinery margins, for example, so you could ensure you had good pricing in the market.
MR. EPSTEIN: I'd be surprised if the majors kind of got out of touch with the rest of their business. Let me ask you about refinery margins. What do you think about refinery margins?
MR. WOOTTEN: I hate them. That's the one part of the market I can't get at.
MR. EPSTEIN: In that case, what, if anything, do you suggest we do about it? What about posted rack prices so that the same price has to be charged to everybody?
MR. WOOTTEN: I'm not sure what I think about that.
MR. EPSTEIN: Any other suggestions? Focusing on this one part of it, this refinery.
MR. WOOTTEN: I think there's probably some validity in monitoring and putting some restrictions on the amount of movement the refinery margins can go through. Refinery margins, if my sources were correct, told me that the refinery margins in Ontario right now are 18 cents a litre, which is why we're going through street price swings of 10 to 15 cents which are absolutely ridiculous for this industry when you think of it.
MR. EPSTEIN: In fact, historically, it's way out of line, isn't it?
MR. WOOTTEN: It's way out of line. I think people that are running the integrated refineries are doing a terrible job of managing that cycle. What it's telling the consumer is every dealer in this room is making 15 cents because nobody sells below cost. That's not logical. At the same time, it's driving independent dealers that are under major brands into a financial tailspin because they can't compete because they don't have 18 cent margins.
MR. EPSTEIN: No, I think that's right. If you have any thoughts about refining margins, let me know. But, thanks a lot.
MR. WOOTTEN: I'll give it some thought.
MR. CHAIRMAN: Thank you, Howard. I recognize Gerald Sampson.
MR. GERALD SAMPSON: Thank you very much, Mr. Chairman. It's good to hear you mention the Cabot Trail, an area that I represent and spent a lot of time fighting for rural areas.
[9:00 p.m.]
Peter Mader was first to bring it up about the rural gas station being an essential service in rural communities. Henry and Bern just touched on that and I figured before the night was over I'd get an opportunity to talk about that. It was brought up last night that school buses have to travel from Pleasant Bay into Cheticamp and back in order to get fuel. What was brought to my mind by a private citizen after the meeting last night was the fact that - this is the first time this came up and another light went on - volunteers. Volunteer firemen, community volunteers. If you're a community volunteer in Pleasant Bay and you use your own vehicle or in any rural community, you go to a fire or you go to whatever to do what you do, suddenly the volunteer cost has gone through the roof because of fuel. Therefore, less volunteers.
Bernard also brought up about the effects on tourism. So we're seeing any and all aspects - of course, the financial hardships that the independent dealers are suffering. It's kind of a different approach and I was glad to see that you're willing to make these small deliveries and hopefully when you get as large as the big companies, I hope you don't take their perspective and change. Is it your incentive to go around and try to look after these rural communities in building your business? That appears to be what you said when you made your presentation.
MR. WOOTTEN: That's exactly it. In fact, I was driving the Cabot Trail two weeks ago, stopped in Margaree Valley and a number of the other sites and just said hello to the dealers and asked them who else was in the neighbourhood we could sign up.
MR. GERALD SAMPSON: There's no station in Pleasant Bay.
MR. CHAIRMAN: One quick question from Mr. Taylor.
MR. TAYLOR: Mr. Wootten you incited me to ask a question about the pressures that might be brought to bear upon you and your partner regarding XTR. I certainly don't want to do anything, as a committee member, that's going to compromise XTR. It's one of the good news stories that we've heard at this table, not only by you but by your customers . . .
MR. WOOTTEN: Oh, good.
MR. TAYLOR: . . . the retailers. Can you tell me, it must be a very competitive - and we know that it is - job place out there for you, but from your competitors is there a fraternity out there that is giving you lots of support, are they saying way to go, you're doing a great job for the retailer, or is there any undue pressure being brought to bear?
MR. WOOTTEN: I don't know, let me ask Dave. (Laughter) As marketers in Nova
Scotia - and I deal in five provinces - I think we all have our own programs, we listen carefully when each other's dealers talk to try to find new ways to operate our business more efficiently, but we're all uniquely different, as well. That really is just part of the market dynamics and part of the opportunities as it relates to dealers and the market being able to have choice. My concern, relates as you, as a committee, move forward, if you do move towards a legislative decision, is that we ensure that you continue to provide legislation which continues to provide independent dealers a choice.
MR. CHAIRMAN: Thank you, sir, for your presentation tonight. We certainly enjoyed your information. Safe trip back home. We're going to take a five-minute break.
[The committee recessed at 9:02 p.m.]
[The committee reconvened at 9:13 p.m.]
MR. CHAIRMAN: Mr. Elroy Hanes is our next witness. Sir, good evening to you. I would just like to tell you that your comments will be recorded this evening. It's certainly a pleasure to have you here with us this evening. I would ask you to just give your name for the record, sir, and the floor is yours. If you wish, at the end of your presentation, to take a question, then we'll open up the committee for you.
MR. ROBERT ELROY HANES: My name is Robert Elroy Hanes. I started in business for myself in 1937 and I've been in business ever since, except for about four years during the war. I spent four years in the war. Now, back then, when I started, gas was 10 cents a gallon. I had a little war going on here between the service stations, if you bought $1 worth of gas, I'd give you 11 gallons. Gas has changed. In 1939, the war started, and in 1942 I went in and was there until 1946. I am still working, to supplement my pension, at 83 years old. The price of gas and home heating oil, that is if the price of gas and home heating oil is to continue as it has, prices changing daily, it will cripple the province and the country. In this province almost all goods are transported here by truck today, if you have a truck product.
[9:15 p.m.]
Last Fall I filled my home heating tank at a price, and then the next tank of oil, the same amount, was up over $50. When I asked what was the difference in price, they said it was Winter. If the prices are allowed to continue, all will suffer, transport industries, school buses, taxis, Acadian Lines, courier services, garbage removal, recycling, landlords and private citizens on fixed incomes.
I see as the solution for all of this, that the gas companies should be regulated on a one- to two-year cycle, as are insurance, transport companies, buses, et cetera. Around the end of June of this year, 2004, crude oil was $35.53, on July 15th it went up to $41.20, an
increase of $5.67 a barrel. The oil companies' excuse is that they are buying on the world market. If the problem is handled by government properly the world market can be forced to comply to the same regulations, if they want to sell their crude oil. The time is right now, to get it done before the Winter. There should be enough oil and gas in the Nova Scotia offshore that we shouldn't have to be depending on OPEC for supplies.
Another problem is taxation on home heating oil and gasoline. The sliding scale should be eliminated, and the HST removed altogether, get your royalties from Ottawa. The senior citizens of Nova Scotia depend on pensions and cannot save enough money in the Summer to buy oil, hydro and food for the Winter. So, they are forced to make a choice, and this is not right. Seniors' oil should be subsidized for the home heating and hydro. That's it.
MR. CHAIRMAN: Thank you, sir. Thank you for your presentation this evening. I'm not seeing any questions for you. We do thank you for coming in, and thank you for your many long years of service to your province and to your people. We wish you well, sir. Thank you kindly.
MR. HANES: I look forward to a lot more. (Laughter)
MR. CHAIRMAN: Marvin Robbins, private citizen. Sir, you've been in the auditorium this evening, you know the rules of procedure. Please take your seat and give your name for the record. I'm glad you had your supper, sir, so you're not hungry.
MR. MARVIN ROBBINS: Not right now. Mr. Chairman, my name is Marv Robbins. I live and work in Pictou County. I'm a frustrated consumer. Of course I'm not privy to what is taking place in the oil market, except for what I read and what I hear, so perhaps my views tonight maybe interpreted as being a little simplistic. However, they're my views.
I would like to congratulate the government and Opposition Parties for addressing the current prices of petroleum products in Nova Scotia. It would have had, I think, a greater impact had these discussions taken place prior to the last federal election. Of course, we have no control over world prices, however, as a major exporter of oil and gas, I think all Canadians should benefit and enjoy a lower price for our petroleum products. Perhaps our federal and provincial elected officials should be looking at ways of subsidizing the price to consumers.
As a consumer I wonder how stable the New York Stock Exchange is as it pertains to the trading of oil given recent convictions of fraud and questionable trading practices of some corporate executives in the United States and the demise of some big companies. This committee should look very closely at discussions with the federal government at reducing some of the taxes on oil and gas in the short run. With the inflated price at the pumps there seems to be quite a windfall of taxes. It might be appropriate to monitor profits of oil companies, I'm wondering if Irving Oil declares its annual profits?
I have often wondered why prices go up by four and five cents a litre, but when they go down it's always by one and two cents a litre. I've watched prices in Pictou County rise by four cents a litre three weeks ago and the price of a barrel had been stable at that time for over a month. I also wonder how much oil is in the system and how does it relate to the increased prices on a given date. I recently traveled to Montreal and people seem to say that Quebec seems to have a model way of pricing. Prices there go up on Thursdays and come down on Monday morning. I was there for two weeks and seen this happen. This was the whole island of Montreal. I also noticed that it is Irving Oil who always puts their prices up first in Pictou County and is followed by the rest within 24 hours. I'm asking does Irving Oil get advised first of any increases? I also wonder where Bill Simpkins gets his information that we are paying a fair and reasonable price for gasoline. When the last time world prices went to forty bucks, the price at the pump was 0.78 cents a litre. Now that we have arrived at $40 again, we are paying 0.94 cents a litre. I can't see any recent large investments in refining capacity. Many gas outlets have closed over the last several years. Gas stations are not getting very much of the pump prices, as evidenced at these hearings. Stations have been turned into grocery stores and pumping stations where consumers can't even change a flat tire.
Our free market system depends on fair competition and every company is entitled to a fair return on his investment. Maybe our elected officials should be encouraging outside large oil companies to come into Canada, and maybe if we monitored the pricing system a little closer we could enjoy a more realistic price at the pumps, say 0.69 cents a litre. I feel frustrated gentlemen, when I call the oil companies, Consumer Affairs or the Energy Department, and can't get answers as to why prices fluctuate and seem to be tied to heavy use, gas in the Summer and heating oil in the Winter.
Those, Mr. Chairman, are my views as a consumer here this evening and I felt I had to come and share them.
MR. CHAIRMAN: You're certainly entitled to point of view, sir. Would you take a couple of questions?
MR. ROBBINS: Yes, sir.
MR. CHAIRMAN: Thank you. I'd like to recognize Gerald Sampson, please.
MR. GERALD SAMPSON: Thank you, Mr. Robbins. I feel safe to say the statement that I'm going to say now because back in 1959, I guess I'm older than I thought, my sociology professor told me that statistics don't lie, only the people that make them, and I was going to use that statement earlier in the night, but there was some tension in the air and I chose not to do it because I'm not accusing anybody of that statement, but the confusion reigns around, as you heard me earlier say, everybody has statistics that they give you to prove their point and as you just said there you referred to Mr. Simpkins as saying we're
getting a really good deal at the pumps. My question to you, it's more of information, you're saying that maybe the provincial and federal government should reduce their taxes in order to make it better for the consumer. We've run across that already and immediately when it was suggested, the reply was that it's the same as if a supplier were to put their gas up one cent a litre to try to make an extra profit, it seems the wholesaler will put it up immediately behind the very next day as soon as they find out so they don't make any money. If the government were to drop five cents off the tax, the oil companies would increase the cost by five cents, so the consumer would not benefit. That's what we've deciphered so far in our hearings.
It sounds simplistic enough to lower the tax, but when you have the suppliers on the other hand, the larger gas companies that would immediately grab what it would be reduced by. Maybe by the time the hearings are over we can some way get around that, but that's one of the things that you mentioned and I thought I would bring it forward. That's about it. I just wanted to pass that onto you and to let you know the confusion around statistics and data and prices and the lowering on behalf of our self, if we said, okay, if we could convince the provincial government to drop five cents a litre off their 15.5 cents profit, but we figure it would be immediately grabbed by the oil companies.
MR. CHAIRMAN: Thank you, Gerald. At this time I'd like to recognize Mr. Jim DeWolfe.
MR. DEWOLFE: Thank you, Mr. Chairman. Thank you, Marv for coming here this evening. I know this is a topic you feel very passionately about and you've contacted me in the past, a number of years ago actually, so it was topical then.
MR. ROBBINS: It was a problem then.
MR. DEWOLFE: There was a problem then, there's a problem now, quite obviously. I don't necessarily feel that tax issue is one that we should be too quick to address, given the state of the roads and so on in the province, I mean they're far from perfect as everyone in this room knows, but we're increasing the budget every year on those roads and, in fact, this year we'll spend some $260 million on roads and bridges in the province and out of that, we collect $254 million in the province's motive fuel taxes, but where we have to look as a government is to the federal government for some help on this. We're spending more than we collect, right now on the roads, but the federal government is indeed collecting $140 million this year in motive fuel taxes from the Province of Nova Scotia and over the past five years, they've returned out of that $140 million per year, less than $5.5 million to the province. So they invest only 4 per cent of what they collect, whereas we, as a province, invest more than we collect. So you can see the situation that we're in. We have to continue to make road improvements.
MR. ROBBINS: I, as a consumer, I feel, with the funds that you folks have available
at your disposal, especially where it applies to road work, you're probably doing as best a job as you can. What I, as a consumer, can't digest and when I see the amount of taxes that I'm paying in relationship to what I'm getting for gas, I think it's what? Half. Close to it, between the federal, provincial. It just seems that we consumers keep getting the short end of the stick and there seems to be all kinds of excuses as to why the price is going up and when you hear people in the industry saying, get used to if fellas, this is the way it's going to be and nobody takes oil companies to task. We seem to skirt the issue. It's taxes, it's this, it's the world market. Every time you hear prices in New York going up $41, I'm willing to say, I don't think they're paying $41 a barrel. However, it's a benchmark that gives them the authority
to up the prices at the pumps. I think this is a major issue that should be dealt with on behalf of the consumer, as we talk in a civilized way. There is too much pressure on the consumer as it relates to what we are paying for gasoline today.
[9:30 p.m.]
MR. DEWOLFE: Well, thank you very much and through you, Mr. Chairman, in closing, I just want to thank you again. I know you do a lot of research and so on. If you have anything that you could contribute to this committee during the course of our deliberations, we would appreciate any of your recommendations and any of your research. Thank you.
MR. ROBBINS: Thank you, I appreciate that, Mr. Chairman.
MR. CHAIRMAN: Thank you, Jim. I would like to recognize Charlie, please, Charlie Parker.
MR. PARKER: Thanks, Mr. Chair. Marv, again, it is good to see you. I am glad that you have come before our panel here and given us some of your thoughts.
MR. ROBBINS: Thank you.
MR. PARKER: I guess, as a frustrated consumer, I know that you are involved in the sale of vehicles, new and used. In fact, it is written all over you, I guess, isn't it, who you work for?
MR. ROBBINS: I came from work, Charlie.
MR. PARKER: Right, that's good. I just want to know from that perspective, is it affecting the marketplace, as far as your ability to sell new or used vehicles with the high price of gasoline?
MR. ROBBINS: Of course.
MR. PARKER: How has it affected it?
MR. ROBBINS: Well, I guess the resiliency to the consumer to forget always seems to come up. Several months ago, when this first spiral hit, not only my dealership but most of them in Pictou County were like ghost towns waiting for the consumer just to sit back and digest what he was paying and how much gas he was going to get for the car or truck he was driving. It did affect some of the vehicles that we do sell.
More important, it's the expendable income that that poor consumer - I have been selling cars for 28 years and I haven't seen people checking so closely as they are right now as to how much they should be paying for a car. It's their expendable income that's dictating this. It doesn't take a rocket scientist to realize somebody earning $50,000 a year, and he has a mortgage and a couple of kids in university, he's lucky to make that $300 payment. When I talk of taxes, I think we have to realize, everybody who is taking a piece of this, that that little consumer at the bottom hasn't got the ability to function.
MR. PARKER: So the consumer is watching his dollars. Would you say that they are looking more toward smaller vehicles or more fuel-efficient vehicles? Do you see that trend or not?
MR. ROBBINS: Certainly, but we all live in hope and promise that one day it will come down. I think, unless we start fighting and attacking where this problem is, yes, we are going to sell an awful lot more smaller, little, economical cars, and compromise comfort. That's how it's going to be.
MR. PARKER: Okay, great, thank you.
MR. CHAIRMAN: Thank you, Charlie, and thank you for your comments tonight. We wish you well, sir. You certainly brought a different perspective and we appreciate that.
MR. ROBBINS: Thank you.
MR. CHAIRMAN: Our next witness, Sherry Richard, please. How are you this evening?
MS. SHERRY RICHARD: Fine, thank you.
MR. CHAIRMAN: Your name for the record, please.
MS. RICHARD: Sherry Richard.
MR. CHAIRMAN: Okay.
MS. RICHARD: My presentation tonight is going to be under two hats; the first part of my presentation is to file a petition with the committee. The petition is a six-page petition.
It contains 164 names. The petition reads: "We, the undersigned motorists of Colchester County, would like the provincial government to bring in fuel regulations."
This petition was in a local corner store in the valley area which is about 15 kilometres east of our location here tonight. The petition was there for a two or three day period in late May. Very quickly the petition filled up. I think at the time that the petition was circulated, at that same time the government announced that this committee would be travelling the province.
I am the constituency assistant for Mr. Taylor in the beautiful Colchester-Musquodoboit Valley. This petition was put in the local corner store by one of our constituents, Mr. Fenton Benoit, who is unable to be here tonight so I am presenting the petition on his behalf. I will pass that to Ms. Sheppard.
The second part of my presentation is as a consumer. I am the mother of three young boys. We are an average blue collar working family. My husband is an electrician. I work approximately 20 hours a week for Mr. Taylor. I travel 45 minutes to get to work, although Brooke and I do argue over the time frame that it takes me to get to the office.
Two of my children have specialized educational requirements and we are back and forth into Halifax quite a bit. I spend approximately $100 a week on gas. I drive a small Chevy S10 truck so I'm not driving a big gas guzzler. About once a week we are into Halifax. It is expensive. It is hard to maintain the other things that we would like to do as a family with what we spend on gas.
My truck is a four-wheel drive and I used to have another vehicle that was a four-wheel drive. We used to go mudding all the time. The kids wanted to go mudding. We live in a large country property, we have 80 acres, and a lot of it is mud, mountainous. No problem. We would go up the mountain, we would go mudding, we would put it in four-wheel drive, we would get stuck, we would come out. We don't do that any more because it burns gas. We're going up our driveway, the kids want me to spin the tires, come on, Mom, spin the tires. We don't do that any more. I'm trying to explain to them that spinning the tires costs gas, it is going to burn gas, we can't do it.
It's hard to make them understand that we can't do the things that we used to do. We don't take family trips for our summer vacation, we do day trips. Normally, at this time in the summer, we would have been to different day parks around the province. We've been to the wildlife park once and that was in conjunction with my time going to Stewiacke for work. We killed two birds with one stone.
When we were in Halifax on Friday, we did the waterfront. We were in for medical appointments. On Thursday, weather permitting, we will go to Pictou County to the water
park in Pictou County and we will try to do something else that we have to do. Nothing is done at the spur of the moment anymore.
On the recent gas increase - I believe it was, perhaps, a week ago Monday, I was in Halifax for a medical appointment. I filled my truck up before I left Truro. Had I known that there was going to be such a large jump in gas prices I would have refilled my truck in Halifax. By the time I got back to Truro, I heard that gas prices had gone up three or four cents. Now, I utilize, for the most part, the local Wilson's station because they offer two cents off per litre if you use cash or debit card and I use that a lot. It is a benefit that I try to take advantage of.
Six months ago, I would not use self-serve. I felt that using self-serve was taking a job away from somebody. I very seldom use self-serve. I don't use full-serve at all now. I recognize the savings to myself to use self-serve and that is what I now use. That is costing someone a job and I don't like that that is happening to the young people out there. With three boys, the chances of one of them being a gas jockey somewhere down the road, yes, but not anymore because those jobs aren't there anymore.
Snowmobiling - we don't have ATVs. That's another committee I know you guys, the province, the government is looking at. The kids have lawn tractors that are - the mowers are off them, they are beat up old lawn tractors that they drive around our property. Gas for them - we don't do it like we used to. We don't get gas for the snowmobiles like we used to. When the kids run out of gas for the snowmobiles in the Winter, we are not so quick to jump in the vehicle to go get more gas. The nearest gas station to our home is 10 kilometres away so it's a hike in and a hike back just to get gas for snowmobiles, lawn tractors, regular lawn mowers.
MR. CHAIRMAN: Is that it?
MS. RICHARD: That's probably it.
MR. CHAIRMAN: Yes, well, we thank you for that very personal side of your story. I don't think, gentlemen, we heard it to that degree before. We do thank you for that. Not seeing any questions, we thank you for your presentation.
MS. RICHARD: No questions? (Laughter)
MR. CHAIRMAN: No questions.
MS. RICHARD: Thank you.
MR. CHAIRMAN: Thank you, kindly. The next presenter or witness, David Parker, please. David Parker. Sir, you understand the rules and procedures of this committee, or do you?
MR. DAVID PARKER: Yes, I do.
MR. CHAIRMAN: Thank you. State your name, sir, for the record.
MR. PARKER: My name is David Parker. I am here as a private citizen but I am also a Councillor in Pictou County.
MR. CHAIRMAN: Oh, well, councillor, excuse me. I would like to call you by your position. You are welcome here tonight, councillor.
MR. PARKER: I will start by saying this is the first meeting I have attended. I found it quite informative. I am a fan of some type of regulation. I believe the retailers, I have heard tonight, are being squeezed. I have heard two - I guess I call we'd them wholesalers - Mr. Collins and the fellow from Burlington, Mr. Wootten, I believe it is. They're operating in a competitive environment and are eking out an existence, or their businesses appear to be succeeding.
I think the only place - and we have no impact whatsoever and never will have on the world price of oil - so the only place we can have any type of effective regulation is on refiners' margins. I recall an interview that Mr. Collins gave some time ago where he used the adjective, stratospheric, in referring to their margins. They seem to shoot up right behind a rapid increase in the world price of oil. Then they settle back down and then the next time we have a price spike, the refiners' margins get out of kilter again. So if we are looking at regulating, I suspect that is probably the only area that we can have a significant impact on.
Now my main concern is actually not gasoline. We all make decisions as to how we spend our gasoline dollars to a degree. The car I drive was a decision on how much I wanted to spend for the car, how much I wanted to spend for gas and how much I drive it is a daily or weekly decision beyond the requirement of getting to work, et cetera. We have sort of a base amount and then we have an optional amount. Many of us have reduced our optional amount.
But heating oil is not quite like that. It is much more of a requirement, a certain amount of heat in our homes. I do not use heating oil but in my job, I quite often speak to people who are having real difficulty paying for their heating oil. I guess I am somewhat thankful that this most recent price spike occurred in the middle of the Spring and not in the middle of Winter. I have heard some very heart-rendering stories from some of my constituents. They literally can't afford to heat their home.
One lady told me, last July, she was hoping to get her bill paid off by October so that she could then get credit to get oil for the next Winter. Another - again, a widow - told me, when Winter comes she closes down everything but her living room and she lives in her living room, with two sweaters on and so on and so forth. She simply can't afford to heat and she had a fairly modest home in terms of size.
I have a couple of recommendations and one is, if you are going to regulate it, it has to be at the refiners' margin end of things, although, from what I have heard tonight, there needs to be some control over how they can squeeze the independent or the semi-independent garage owner, the station fellow that pumps the gas for us.
I believe that we could, at budget time, each year, provincially, set a ceiling at which we would no longer charge HST. So, for example, if we look at the average price over the last year and said, well, we are going to set a ceiling at a $1.00, or 99.9 cents, which seems to be a magical figure there. If beyond that price - and if there is a political will it can be done - the feds and the province can agree to no longer charge HST.
One of the things I found particularly galling of the coverage during the last price spike was to hear the fellow come on and say, well, we are really not getting any more HST. He tried to explain it away. But when the price goes up by 20 or 25 per cent, I know I paid a lot more HST. I still needed 30 or 40 litres of gasoline twice a week and I had to pay the HST. So to say he didn't collect more HST is not factually correct, in my opinion.
I would like our government to be seen to be pulling with us during those very difficult times when we are going through a price spike, and we may be entering into another one right now. So that when it went above that magic level - and the Minister of Finance could outline that in the budget - both for gasoline and home heating fuel, when it went above that there would be no HST.
Now I heard Mr. Sampson's point earlier that we would have to have some way to make sure the oil companies don't simply grab that as profit, or the refiners, I guess, grabbing it as profit. But I think, that way, our government would be seen to be pulling with us and not just sitting back and apparently getting a windfall. I'm not saying that there is, necessarily, a full windfall there. I understand part of their argument. But during those difficult times I would like to think our government is working with us and not against us.
[9:45 p.m.]
The other suggestion that I would like to make and, again, it goes towards the cost of home heating fuel - is, I believe, just like we have had different tax levels in the past on different size vehicles, I think we should look at the same with new homes and condos. I think every house and condo that is built in this province - we have building inspectors to inspect it - we should be recording their square footage and we should be recording their
insulation values. Those who choose to live in 3,000, 4,000, 5000 square foot homes should be paying a premium and that money should then be directed to those low-income individuals who literally are shivering. I won't say freezing to death, I don't think that is happening, but they are certainly suffering hardship in their homes. So those are the recommendations I would like to make to the committee.
MR. CHAIRMAN: Thank you for your presentation. Any questions? Not seeing any, councillor, we will say good evening to you. I think before you leave, we would like to mention that you're Charlie's brother.
MR. PARKER: Thank you. (Laughter)
MR. CHAIRMAN: That's important. It's important to have family here as well. Thank you for your presentation, sir. Brian Crowley, please.
Good evening to you, sir. You have been here as well. I think you understand the rules and procedure of our committee.
MR. BRIAN CROWLEY: I think I do, Mr. Chairman. Thank you very much.
MR. CHAIRMAN: Thank you. I am just trying to do away with repeating that.
MR. CROWLEY: Absolutely.
MR. CHAIRMAN: Sir, you do have the floor. State your name, please.
MR. CROWLEY: My name is Brian Crowley. Mr. Chairman and honourable members of the select committee, I really appreciate the permission to spend a few moments with you this evening to discuss what I think are very important issues that your committee has been charged to investigate on the issue of gasoline pricing and supply.
I would like to start, if I may, by saying a very brief word of introduction about my institute, the Atlantic Institute for Market Studies. We are Atlantic Canada's public policy think tank. We are about to celebrate our 10th Anniversary of work on public policy issues of concern to Canadians and Atlantic Canadians, in particular. We are nationally and internationally recognized for the quality of the public policy work we do, as evidenced by the fact that we are a four-time winner of the prestigious Sir Anthony Fisher Memorial Award for excellence in think tank publications. There are over 100 think tanks in 40 countries that are eligible for that award. Nobody has won it more times than we have.
We are doing, we think, world-class public policy analyses right here in Nova Scotia. We are totally privately financed. Since I know this question will come up, we get something on the order of 2 to 3 per cent of our budget from the oil and gas industry. I can tell you a lot
more about AIMS during the Q and A period but I don't think that is what we here to talk about now. So let me talk a little bit about the issues you are considering here.
I have not been able to attend all of your meetings but I have certainly been following your work. While I know that you are very much still at the investigation stage and that your report remains to be written, it has become clear to me from what I have read and heard about the testimony, and the hearings that you have been hearing, that your deliberations are starting to crystalize around a certain number of issues.
Those issues, as I understand them, deal chiefly with the situation of gasoline retailers; access of rural customers to gasoline and security of supply; the relationship between economic development in rural communities and the existence of gasoline retailers in those local communities; and allegations of improper behaviour by the major oil and gas companies.
Now, I hope if I have misunderstood, during the question time you will put me straight and we may be able to address other issues that are also of concern to you. For the moment I am going to concentrate my attention on the shorter list of issues. It seems to be the subject of the most attention.
Before I deal with those issues, though, I think it is important that I lay out a few assumptions. It is important to make them explicit because you may not agree with them and we will have a chance to talk about them during the Q and A.
My first assumption is that gasoline is a commodity. That means that it is market driven principally by price. A commodity is a good whose qualities do not vary significantly from one supplier to another, and this is certainly true of gasoline. No matter how much some consumers may feel that one brand puts a tiger in their tank and another brand is only putting in tired pussycats, gasolines are pretty much all alike. Commodity markets, like gasoline, are characterized by one dominant trait. There are no significant quality differences, so the market is driven by price. People choose where they go based on price. The lowest cost producer, therefore, has a big advantage in commodity markets.
Assumption number two, nobody makes money selling gasoline. In a commodity market, such as I've described, which is characterized by many competing suppliers, price will tend to be driven down, very low indeed, relative to the actual cost of production, because suppliers keep cutting prices in order to attract market share, because you don't get much selling each litre, you have to sell a lot of litres to make a living. The documented margins on retail gasoline, whether for independents or for retailers representing the majors, are very low, in the neighbourhood of 3 cents a litre, they can be as low as 2 cents, they can be 4 cents or higher, depending on the conditions at any particular moment.
It used to be that retailers could survive with just gas pumps and maybe a mechanic,
but there has been a huge evolution in gasoline retailing. Gasoline is only one of many products that are now sold by retailers, and you'll be familiar with the others, car washes, convenience stores, restaurants and so on. Gasoline actually usually makes a marginal contribution to the bottom line of the average retailer, and in fact is kind of a loss leader to attract customers to buy other goods and services on which the margins are actually better.
Now, the next stage in this evolution is that much larger retailers are now entering the marketplace, offering gasoline as one service amongst a broad range. At the Superstore on the Dutch Village Road in Halifax, there is a Superstore gas bar. Such gas bars are increasingly a feature of Wal-Mart, Superstore, Sobeys, Canadian Tire and other large retail operations that are independent of the major gasoline producers and retailers, but because they're not trying to live from gasoline, but only have to recover their marginal cost of setting up the gas bar, those retailers are going to squeeze the margins even further than they have already been squeezed in the retail gasoline business.
Assumption number three, the consumer's interest should trump the producer's interest. Each of us is both a producer and a consumer, but each of us produces different goods or services from which we earn our living. If you're a lawyer, you want high prices for legal services, in other words you want high prices for the one thing you sell, but you want low prices for everything else, for all the things that you buy. If you're a plumber, you want high prices for plumbing services, what you sell, but low prices for everything else you buy. And so on.
Notice that plumbers and lawyers, teachers and bankers, truckers and gasoline retailers, farmers and electricity workers, insurance agents and book sellers, all producing different things, do not agree on the one thing that should be priced high. Each one of them wants their thing priced high. As consumers, on the other hand, they all agree, and agree strongly, that they have an interest in the lowest possible price on everything they want to buy. So the consumers' interest unites everyone in society in a common cause, which is the lowest possible price for things. The producers' interest divides everyone into their respective producers' camps. The consumers' interest, therefore, is the closest thing that we have to a measure of the common good that cuts across all other interests, and that's why the consumers' interest is the one that should always prevail over individual producer's interests.
Assumption number four, open markets in petroleum products limits the policy options that are available to policymakers. Under NAFTA and a host of other domestic and international rules, petroleum products move freely across boundaries. We cannot unilaterally set rules in Nova Scotia that undermine the profitability of the refining, wholesaling and retailing parts of the gasoline industry, because the consequence will simply be that supplies will be diverted to other jurisdictions where those rules do not apply. No one is obliged to sell to Nova Scotians, for the same reason that Nova Scotians are not obliged to buy from anybody. It is not in the power of Nova Scotia to change this.
My final assumption is that policy recommendations should have to meet certain tests of evidence. This committee represents the Legislature, and through it, both the government and the people of Nova Scotia. You enjoy the majesty and the protection of the law and the aura of legitimacy conferred by democratic institutions. By holding hearings in this manner, we are reminded of the traditional claims of all Legislatures under the British parliamentary tradition to be courts of law. Competing claims are advanced, evidence is brought to bear, reason and judgment are exercised, and conclusions reached, which will then be embodied in the law, which we all be compelled to obey.
But we don't obey the law simply because we would be punished if we didn't, any more than we obey the judgment of judges merely because the police will punish us if we don't. We obey these rulings because they are not arbitrary. We have established, over centuries, rules about how to assess the things that are said in the courtroom and in the Legislature, and we do not accept what is said at face value. We probe it, we contest it and we satisfy ourselves if it's truth or falsehood by thoughtful and rigorous testing according to rules of fairness. Everyone who represents the power and majesty of the state, as you do here in Nova Scotia, has an obligation to exercise this considerable power in accordance with this standard.
So, to make this concrete, and I'm intentionally using a lighthearted example, if a dozen people appeared before a committee like this one and claimed that they had been abducted by aliens or that the Loch Ness monster had set up shop in the Bras d'Or Lakes and were demanding that aliens or marine monsters be regulated by the province, the committee would have an obligation to take steps to establish the truth of these claims and not merely to accept them at face value, no matter how fervently they may be believed by those who brought them to the attention of the committee. Anecdote is not evidence, and lawmakers should be moved by evidence and reason, and not by emotion and prejudice. By the way, I expect that standard to be applied to me and what I have to say, just as much as I think it should be applied to anyone who appears before this committee.
So, with those assumptions on the table, I want to proceed to my consideration of the points that I mentioned as being the ones that your considerations seem to be crystallizing around. I've already mentioned that retailers can't survive on low retail margins, their survival is crucial to the economic integrity of rural communities, that major oil and gas companies conspire together to undermine the existence of independents, and that the solution to these problems is a regulatory regime that ensures higher retail margins on the order of 3 cents to 5 cents higher than at present.
Well, given the assumptions I've already outlined, you'll understand that I'm here to contest each one of those claims as a sound basis on which this committee might formulate policy. The case that I've just laid out is a standard producer interest case, every producer of anything always wants to suggest that their narrow interest is somehow bound up with the greater good of society, but that is almost always a bogus claim, and it is certainly so in this
case. Each year approximately 1.2 billion litres of gasoline is sold in Nova Scotia, therefore, to put an extra 3 cents per litre in the pocket of retailers will cost $36 million, an extra 5 cents per litre in the pocket of retailers will cost an extra $60 million. So the cost of an increased retailer margin would be between $36 million and $60 million.
If my assumption is correct, that continental open markets prevent us from taking regulatory action that would damage the profitability of the oil and gas industry, then the cost of this regulatory regime cannot be passed back to the industry. Any attempt to do so would not result in higher margins for retailers, but supply shortages for consumers and, in fact, it is well established that the price regulations in Prince Edward Island, for example, have chiefly damaged retailers and it resulted in the loss of retail capacity, chiefly in rural parts of the Island.
So, the extra margin that's being discussed can only be financed by consumers. It can only be financed by consumers. If ever, therefore, the regulation were proposed to support retailers' incomes through higher margins, by regulatory order, this committee should be in no doubt that that would amount to an effective gasoline tax increase on the order of $36 million to $60 million for Nova Scotians. Diplomatically put, that would be a rather peculiar outcome from a committee that was charged with making recommendations to deal with prices that were already felt to be too high.
Now we could talk about the importance of retailers to rural communities. I know that I've only got about a minute left, so perhaps we can come back to that during the question period, Mr. Chairman. I think it's a very important issue. Let me just turn now to the question of the charge that wholesaling operations of the majors are engaged in price and supply discrimination against retailers. I want to be very clear, when this suggestion was being made, that companies are being accused not merely of anti-competitive behaviour but of criminal actions under the Competition Act. These are extremely serious accusations and should be treated as such. They are certainly not to be treated as if they were obviously true, but rather should be treated as allegations against reputable companies that pay lots of taxes, have been in business in this province for many years, and employ a great many Nova Scotians. They are allegations to be investigated, to see if they have any foundation.
Fortunately, we have resources that we can draw on in this regard and I would venture to say that the petroleum products industry is one of the most studied and investigated in this country. For example, we have in Canada a Competition Bureau headed by Sheridan Scott. That bureau has the responsibility of enforcing competition law and policy in Canada. It has frequently investigated, and I can go through the list, there are at least 10 inquiries in the last 10 years that have investigated exactly this kind of anti-competitive charge against the industry and all of those conclusions have been negative. Industry Canada has done the same thing. I could name a number of other investigations.
[10:00 p.m.]
MR. CHAIRMAN: Sir, could we open up for some questions now?
MR. CROWLEY: Yes, absolutely.
MR. CHAIRMAN: You do have a moment at the end of the presentation to provide us with your closing comment.
I would like to recognize Mr. Brooke Taylor first.
MR. TAYLOR: Thank you, Mr. Chairman, and I would like to congratulate Mr. Crowley on his public policy think-tank. I do know that they do a lot of good work and they're certainly well read by Nova Scotians and Canadians. Yes, Mr. Crowley, you are right, when one is concerned about price discrimination, it certainly does upset without intent the oil companies, but the fact of the matter is we've heard from a number of presenters what I believe to be pretty overwhelming statements. What I consider fact and what you consider fact are, obviously, two different things and evidence and things of that nature. What do you propose, if it's a fair question, I put to you, and I would like to just refer if I could, Mr. Chairman, to this report that was drafted up, it's the final report that was put together by the Liberal Committee on Gasoline Pricing in Canada in 1998.
They spoke about economics and the supply and demand situation and that particular committee heard from some industry participants that it is ultimately supply and demand balances that account for price volatility at the pumps. The committee also felt that the wave of mergers in the last decade has led to an unreasonable level of concentration in the industry and that normal supply and demand economics cannot account for the large price swings that Canadians, i.e. Nova Scotians, are seeing at the pumps. Being a master of economics, or at least some of the specifics relative to economics, what's your thought on that statement that the committee made in 1998? I know it's a few years ago.
MR. CROWLEY: Well, you know, everybody always feels that somehow it's an evasion to say that these are complicated matters. However, the truth is that these are very complicated matters. I would point out to the committee that something like 85 per cent of the final cost of gasoline at the pump is composed of two things. It's composed of the cost of crude and the cost of taxes. So every other cost that goes into it, we're talking about refining, the wholesaling, retailing, everything else, it only constitutes about 15 per cent of the pump price and, well, you have a lot more control over the taxes than the industry does. The industry is a price taker, not a price maker, in terms of the cost of crude.
I certainly don't think that the regulatory approach that has been suggested in which bureaucrats are going to give permission to companies about when to raise or lower their prices has been proven to be in the interest of consumers and, indeed, if you look at Prince
Edward Island, the studies I think are very clear that if you add up the costs of gasoline over time, that consumers in unregulated Nova Scotia have paid less than consumers in Prince Edward Island once you factor out the tax difference because, as you know, we apply the HST on gasoline here and there is no provincial sales tax on gasoline in Prince Edward Island. You take out the tax difference and over a period of two years or so Nova Scotians pay less in total for gasoline than Prince Edward Island consumers. What happens in Prince Edward Island is you get rid of the volatility, you slow it down, but of course it's in those swings and roundabouts that the Nova Scotia consumer ends up accumulatively paying less.
MR. TAYLOR: If I might, Mr. Chairman, we have received some presentations with accompanying charts that indicate that that very statement is wrong and, in fact, in a presentation Friday evening from the Nova Scotia Government and General Employees Union and, you know, I take their researchers to be professional in their approach to this issue, they provided us with charts that indicated that for three straight years Prince Edward Islanders enjoyed lower prices than Nova Scotians.
MR. CROWLEY: All I can say, Mr. Chairman, is I can supply you with data that does not support that conclusion and I am glad to do that. It's data supplied by independent researchers and not hired by me and I would be glad to supply that information to the committee.
MR. TAYLOR: I think, Mr. Chairman, if I might, we would welcome that.
MR. CHAIRMAN: Very much so.
MR. TAYLOR: It is difficult, let's make no mistake about it, we have a lot of information and it doesn't always coincide.
MR. CROWLEY: I agree.
MR. TAYLOR: We have to, during our deliberations subsequent to these hearings, get down to some brass tacks and for those who do believe and most do, in the free enterprise capitalistic society, it's pretty difficult when you're wrestling with this issue. Anyway, I just want to say we appreciate your viewpoint.
MR. CHAIRMAN: Thank you, Mr. Taylor. Mr. Jim DeWolfe.
MR. DEWOLFE: Thank you, Mr. Chairman, just one question really. You indicated, in fact you said, during the course of one part of your presentation that any increase in margins would have to be funded by the consumers. I say why? It has been brought to our attention that throughout the province the wholesale price of fuel being sold to the retailers differs, sometimes by quite an amount, and there appears to me that there's enough wiggle room in this when some retailers - one told us that he was making between 7 cents and 14
cents. Other ones are toughing it out, and toughing it out they are, at less than 2 cents. So there's obviously some room for movement to bring fairness to the retailers without putting that pressure on the consumer.
MR. CROWLEY: Well, Mr. Chairman, first of all as I indicated, we exist in a continental free market for refined petroleum product as well as crude petroleum. We cannot set rules that will undermine the profitability of the business in Nova Scotia and expect that people who could be selling those things at a better margin in other jurisdictions will continue to bring them here. So that's one of the limits on what we can do. I'm not saying that that means you can't do anything. It's a limit on what we can do.
The other thing you have to remember is that the margins that retailers enjoy that you referred to, some people have a margin of 2 cents, other people have a margin of perhaps 7 cents, 8 cents, 10 cents, those margins are not driven exclusively by what they're paying the wholesaler for gasoline. Those margins are the difference between their overall costs and what they're able to charge consumers. Now, it may be that there are gasoline stations, you know, they've been owned by the same person for a long time, their mortgage is paid off, they're in a rural area, they have low taxes, but there are all kinds of . . .
MR. DEWOLFE: We understand all those things.
MR. CROWLEY: All of those things go into making up the margin so that a regulatory solution that assumes that margins are somehow driven solely or even chiefly by the wholesale supply price I think is doomed to failure.
MR. DEWOLFE: Thank you, sir.
MR. CHAIRMAN: Thank you, Mr. DeWolfe. Howard Epstein, please.
MR. EPSTEIN: Mr. Crowley, I so profoundly and completely disagree with your world view that it's difficult to know where to start, but I do want to make a few points to you. Your comment that oil companies are reputable companies seems to overlook, for example, oil spills at sea, or the way gasoline is extracted in Nigeria, or the fact of wars in the Middle East that are primarily about oil. For you to ignore such facts and insist that oil companies are reputable either implies that you're very ignorant of the world or you think we are and I don't really like either explanation.
Your comment that gas is a commodity and, therefore, driven entirely by price, I don't find entirely helpful. Apples are a commodity, but we're not discussing apples. We're dealing with something that's a commodity that's also a necessity. Unfortunately, our world in North America is not built around apples the same way it's built around gasoline. We have to come to grips with that.
Although you didn't say this next point, you rather implied that the entry of entities like the Superstore and Canadian Tire into the gas business is likely to be the way that consumers can find the cheapest product. I suggest to you, it may be cheapest until all others are put out of business and then we would find quite a different situation after that.
As for your point that because gasoline is an internationally traded commodity and, therefore, we couldn't attempt to control the price out of the refineries that might be in our territory, I also disagree and I disagree because, if the government sees itself as having a role in guaranteeing security of supply and is prepared to intervene, then, in fact, the government can make it clear that it will provide the commodity from the producers if necessary. If it was the choice in a regulated market that refiners chose not to import into this market, the government could do so. In any event, thank you for your comments.
MR. CROWLEY: Well, Mr. Chairman, if I may, since a number of points have been raised, may I respond to some of them?
MR. CHAIRMAN: You may, Howard, is it all right for a response?
MR. EPSTEIN: Yes.
MR. CHAIRMAN: At the pleasure of the committee member, you can continue.
MR. CROWLEY: Obviously we don't have time to deal with all of them. I would simply point out that the oil and gas companies are reputable corporate citizens in this country that obey the law and pay their taxes, and I think they should be treated as such. I think that with respect to the suggestion that somehow the existence of retail competition for the majors from large scale retailers like Wal-Mart and Superstore is somehow going to destroy the competitiveness of the market, on the contrary, I'm afraid I disagree very strongly. These are powerful companies that alone have the power to meet head on the competitive power of those international oil companies. Small independent retailers in rural communities in Nova Scotia don't have that kind of marketing power and what serves the interest of consumers is to have many powerful companies trying to meet their needs.
I would suggest that consumers have been voting very clearly and, indeed, that's part of the problem that this committee is wrestling with that is consumers have been voting very clearly to say that they want to go those places that are supplying the lowest prices because gasoline is a commodity and they have chosen voluntarily not to, in many cases, support higher cost of retailers in their community because they are seeking the lowest price and that's what matters to them.
MR. CHAIRMAN: Thank you, sir. At this time I'd like to recognize Mr. Danny Graham.
MR. GRAHAM: Thank you, Mr. Chairman and thank you, Brian, for once again showing the courage to bring forward ideas that you recognize aren't universally held by everyone in Nova Scotia and I would acknowledge the work that your organization has done over the years, I think that the discussion that you have provoked and your organization has provoked over the last 10 years has been helpful in Atlantic Canada on a variety of issues.
On this one, however, I have yet to be convinced of the position that you take and I think principally rests with your assumption number three. You suggest that consumer interests are the trump over producers interest in all circumstances, and I think that there are clear limits to the extent to which you can take that. If there weren't limits to that, we wouldn't have labour standards, for example. We wouldn't be providing people with a reasonable standard of living, reasonable hours, reasonable age limits and all of those other things. I come from a background where I represented the biggest commercial retail leasing organization in Atlantic Canada and I'm quite familiar with the power and balance that exists between landlords and tenants in commercial property and we exercise that. I considered that, frankly, to be a vigorous exchange between landlord and tenant and I still operated on the basis that this is part of the way that the market works and sometimes there's a competitive advantage that a landlord might have over a tenant. We'd largely say, take the lease as it reads or walk.
[10:15 p.m.]
The experience and the information that we have received from the retailers who have appeared before this committee, however, I would suggest, is qualitatively different from that, especially when we hear from a number of retailers who are suggesting that when they have a particular margin and they try to improve their margin by independently increasing their price, on their next bill, for example, they notice that the price goes up by exactly the amount that they intended to increase their margin by. Nobody to whom we have put this scenario in this committee, including industry representatives, have suggested that this is anything other than, presuming it exists and it seem to have been confirmed by a number of people, anything other than oppressive, that this is an unfair practice. I'm wondering in the limits that you might be describing, the first part of this because this is a values-based discussion, what are the limits on all of this and surely you would agree that action, if founded that is of the type that was described by these retailers, is unfair?
MR. CROWLEY: Mr. Chairman, if I may in response to that question?
MR. CHAIRMAN: Yes, through me, and if you would address the member by his name, Mr. Graham.
MR. CROWLEY: Of course. He called me Brian. (Laughter) Mr. Chairman, look, as I alluded to very briefly in my remarks, many of the forms of behaviour that are described by many of the retailers, are in fact, illegal in Canada. Predatory pricing is illegal in Canada.
I have not conducted the investigations. Industry Canada conducted the investigation. The Competition Bureau which is charged with applying competition law has investigated over and over again. I can go through the list for you if you want of all the investigations, the Competition Bureau has one of the most intrusive sets of investigative powers of any organization in Canada. If it is the case that the retailers have what they claim to have, which is documentary proof of predatory pricing and other anti-competitive behaviours, why have they not brought them forward when the Competition Bureau was publically asking for evidence of anti-competitive behaviour by the oil and gas companies? Why did they not bring it forward when Industry Canada was publically asking for documentary proof of anti-competitive by the oil and gas companies? People making these allegations have an obligation to provide proof that would be convincing to an independent uninvolved party. I have to say, Danny, I have not seen this evidence. I've heard a lot of talk, but talk is cheap. Where's the beef?
MR. GRAHAM: Well, if you'd been with us travelling around the province and listening to the retailers over the last period of time, I think that while it doesn't satisfy any standard beyond a reasonable doubt. The members of this committee have been charged by the people of Nova Scotia to exercise their common sense when they listen to people and the common sense that they have been hearing from retailers across this province is that they are in some respects, certainly in the circumstance that was described by Mr. Grace, confirmed by Mr. Cormier and others, when this notion of increasing prices, trying to increase your margin and then when one increases prices afterward what is happening, then we believe - certainly I can't speak for the rest of the committee - this type of action is a small window into a mysterious big something out there that is difficult, frankly, for even a committee with our resources, to get our hands on, but it seems to suggest an attitude and it, in some respects, corroborates the other suggestion about the way that these other groups feel that they are being, in their words, preyed upon.
If I could, and I know that time is limited, I'd like to just turn to the suggestion that consumer interests are always the trump card and I would like to suggest that what we've heard is a modification on that, that consumer interests, in some respects, relate to the notion of smoothing. That in some respects, consumers may make the choice that we would like to have the smoothing that's associated with some form of regulation. The other consumers that need to be spoken for are not the ones on Dutch Village Road, but the ones in Canso and the ones in Pleasant Bay, who won't have a supply at the end of the day and if we allow Adam Smith and his theories to decide where gas is being sold and at what price, it's not going to be available to the people in rural communities.
We have just heard from one of the most informed people in this province about oil prices that there's a risk that in the not too distance future, one-third of service stations in this province are going to disappear and it's going to be largely in rural communities, and that's a matter, frankly, that this committee needs to take seriously. You didn't have an opportunity to make your central points with respect to the closure of rural service stations and perhaps
this is your best opportunity to do that. I know that our time is tight so I'll limit my comments to that.
MR. CROWLEY: Okay, very quickly, Mr. Chairman. In response to the first point that Mr. Graham raised, all I would say is, if you are convinced of the argument about the anti-competitive behaviour of the oil and gas companies, then I invite the committee to ask the Competition Commissioner Sheridan Scott, to come and tell you what the results have been of her profound investigation using extremely powerful investigative tools as to what evidence can actually be found. I'm sure that she or her representative would be happy to come and I think you have an obligation to find out what the best evidence is available on these points.
With respect to rural supply, I would point out that it's always been available to rural consumers to support local retailers by willingly paying a higher price locally for service, convenience and security of local supply. But the fact of the matter is, they have chosen not to do that. They prefer to save money by filling up on their regular trip to the Superstore or the bank or the community college class or the Price Club or Canadian Tire or whatever. I know that you represent largely rural constituencies - I wonder what percentage of the cars in each one of the rural constituencies represented on this committee makes a weekly trip to a major town or city in Nova Scotia or drives past a filling station on a major highway or past an Indian reserve with a filling station, et cetera, et cetera. I would be willing to bet that it is something on the order of 60 per cent or 80 per cent and possibly higher.
So, your own constituents, in order to save money, have themselves chosen to abandon the local retailer and the spread of gas bars at Sobeys and Superstore and Canadian Tire will put greater gasoline supply and lower prices within the reach of the vast majority of consumers in the next few years, including in rural areas. So I'm afraid I'm completely unmoved by this argument.
MR. CHAIRMAN: Thank you, sir. Is that your question, Danny?
MR. GRAHAM: Yes.
MR. CHAIRMAN: Thank you. At this time I'd like to recognize Mr. Brooke Taylor for a quick one, Brooke?
MR. TAYLOR: Just a quick one, Mr. Crowley. You speak about of the Competition Act and what powerful tools that particular piece of legislation has to deal with some of these allegations. I want to reinforce my view that we're receiving a lot of good information here and a lot of it doesn't coincide. This committee report that the Ontario Gas Prices Review Task Force completed June 29, 2000, it says completely opposite to what you're saying. The task force repeatedly heard that the federal competition legislation, the Competition Act and the federal Competition Bureau were ineffective, toothless, slow to respond. As one presenter
noted, a government agency, the Competition Bureau, that takes 10 months to investigate one small complaint is clearly ineffective.
I just want to point out that we're receiving lots of good information about a lot of different things and it doesn't always coincide.
MR. CROWLEY: Thank you.
MR. CHAIRMAN: Thank you. Mr. Parker.
MR. PARKER: Thank you, Mr. Chairman. Mr. Crowley, you mentioned earlier on in your comments that you are funded privately, I guess 100 per cent, your think tank? Part of that funding is from the oil companies so in some ways, I guess you have some vested interest in protecting their interests and I'm sure perhaps that's part of the reason you're here this evening.
We also talked about large retailers the gas companies are heading towards like Wal-Mart and Canadian Tire, Superstore and so on. Do any of those also support your foundation?
MR. CROWLEY: I mentioned at the outset that less than 3 per cent of my funding would come from oil and gas companies. We make a point of trying to spread our support across a very broad range of businesses, industries and foundations. By the way, 60 per cent of our funding comes from charitable foundations and only about 30 per cent from corporations and small businesses and individuals.
In response to your question, maybe 1 or 2 per cent would come from large retail operations. Somewhere in the order of 4 per cent or 5 per cent maybe, tops, would come from those two interests combined.
MR. PARKER: So certainly a vested interest that you're supporting here tonight.
MR. CROWLEY: Well, I like to think of it, they are supporting me because I'm doing top quality public policy work.
MR. CHAIRMAN: Thank you very much, Charlie, for your question. Sir, we did say that you would have one minute for a final comment and with courtesy of the committee and the public waiting to do their presentations, I would ask that you keep it to one minute, sir.
MR. CROWLEY: Absolutely. If you'll give me one second to find exactly what I want to say, Mr. Chairman, I would give you my conclusions. I wanted to make some suggestions about things that might be done.
I think there are a lot of things that could be done. The Nova Scotia Government would do well to expand the pricing information that's available on its Web site about gasoline prices. That would improve the transparency of the gasoline market, it would improve the power of consumers. Ottawa could contribute to drawing the political sting and the volatility of gasoline prices by creating a National Petroleum Information Agency such as already exists in the United States. I think that's very helpful.
I think we need to examine very seriously the tax take on gasoline - I pointed out that 85 per cent of the price at the pump is composed of crude and taxes. If you remove taxes in both United States and Canada, the underlying price of gasoline in Canada is actually lower than the United States, which most people consider to be the lowest cost gasoline market in the world.
I would suggest that if retailers are having the kind of difficulties that we've been discussing, I think they ought to seriously consider forming a buyers' co-op. In the great Nova Scotia co-operative tradition, there are other companies such as Emera which are buying very large quantities of gas. There are no doubt many ways in which companies could combine in order to build their buying power. I think the truth of the matter is, the old independent business model for gasoline retailing is fading because consumers won't support it and there's no compelling public policy reason for this committee to recommend the government intervene to change that and many compelling reasons why it should not.
MR. TAYLOR: Thank you, sir.
MR. CROWLEY: Thank you very much, Mr. Chairman.
MR. CHAIRMAN: Yes, I certainly enjoyed your point. At this time, I would like to call witness Janet Hazelton, President, Nova Scotia Nurses' Union. Thank you for being very patient with us this evening. Pardon me?
MS. JANET HAZELTON: Nurses tend to be patient.
MR. CHAIRMAN: Yes. That's a good one.(Laughter) Anyway, state your name for the record and you obviously know the rules and procedures of the committee.
MS. JANET HAZELTON: Good evening, my name is Janet Hazelton. I am President of the Nova Scotia Nurses' Union and I'm here tonight to speak on behalf of the nurses that I represent that work in the communities of Nova Scotia.
Largely, those nurses are the Victoria Order of Nurses as well as Martha Home Health. Those nurses provide a service to the residents of Nova Scotia in the communities. Years ago, the VON and St. Martha's Hospital provided these nurses with vehicles and the expenses and their gas was covered. But a number of years ago it got too expensive and now
these nurses have to purchase their own vehicles, provide their own insurance as well as the gas.
I'm hearing more and more as we talk to those nurses that it's getting too expensive to deliver the service so a lot of those nurses, now that it's a very competitive market, they can make the same money working in the hospital in Canso as they can working for the Victoria Order of Nurses for a salary. Yet, they have to provide their own vehicle, their own insurance. They get 34 cents a kilometre, but there's no way they can run a vehicle on that anymore.
They have to have two vehicles for the most part. They have to have a vehicle to provide the service. They're on call so they have to be able to have a vehicle in their driveway if they're called out after hours. So, if they're married, their spouse also needs a vehicle if he works anywhere. The nurses are telling me over and over again that it's costing them money to provide the service in the communities of Nova Scotia.
The Victoria Order of Nurses, the employer, is a very reasonable employer. We just finished negotiating with them and they realize that it's costing nurses the money it's costing them, but they have to provide a service and they have to make sure they keep their prices down so it is not handed over to their clients. There are clients out there that pay for the service and if they have to give their nurses more benefits, then that's going to go onto the clients.
It's a bind that we're in and so I came tonight to talk about that. I really believe that we need something. We negotiate their contracts three years out. We just finished negotiating their contract with the 34 cents. I can't tell you a year and a half what that's going to mean if gas goes up much more. It's tough for me to say to my nurses that 34 cents is enough. Well, it isn't enough right now. It's hard to negotiate three years out.
So we need something. We need some sort of a regulation so that we can count on what it's going to be so that nurses can make decisions about whether or not they want to continue working in the community.
[10:30 p.m.]
MR. CHAIRMAN: Fair enough, thank you. Any questions? Yes, Frank Corbett, please.
MR. CORBETT: First of all, I heard Mr. Crowley say that part of the market is that, you know, you can come out of Cheticamp and buy in Sydney and so on, but doesn't realize
when you're coming back from Sydney, you're burning that gas, it's not sitting on the backseat like a bun of bread. So I guess part of your problem, too, is your members must serve a lot of people in the rural areas and that's another phenomena, I guess, if you will, when they go into Pleasant Bay, that they have to gas up in Cheticamp, is that accurate?
MS. HAZELTON: Exactly and down in Annapolis, Yarmouth, you know, we have nurses who are driving 25,000 kilometres a year. They're putting that on their vehicle. So if they have to keep going back somewhere urban-wise to get their gas, then not only would it cost them, but when are they going to see their patients if they're spending those hours going back and forth to fill up and they tend to burn a lot of gas because they make a lot of stops.
MR. CORBETT: Just one other quick one, we had talked before and you talked about it, there's an escalating factor or a declining factor in kilometrage?
MS. HAZELTON: Yes. Well, recently, until last week, the nurses, were successful in negotiating it out of their contract where they had, similar to the federal government is what we were told, where they got less money the more kilometres. So it was 34 cents a kilometre for the first 10,000, then it went down to 30 cents a kilometre up to 15,000, and so the nurses, if we hadn't gotten that out of their contract, I believe that the majority of the VON nurses would not, and I don't know if they support it yet, the vote count is Friday, but I believe that they would not support it. That was their number one concern: their gas, their vehicles and their mileage. More so than wages, that was their number one concern when we went to the table this time which, you know, it certainly wasn't a concern of our acute care nurses and my concern is they're going to move from the community to acute care.
MR. CHAIRMAN: Thank you, Frank, and I would now introduce to you Mr. Jim DeWolfe.
MR. DEWOLFE: Thank you, for bringing your views to the table. We did have a similar presentation from Joan Jessome, the President of NSGEU, and we understand the plight of those who use their own vehicles more than you would know because we use vehicles, too, and do a great deal of driving during the course of our jobs, particularly the rural MLAs, and it has increased. We know the costs, the insurance and all those things, but the important point that you brought to the table is something that we've already identified - the need to ensure that we keep our rural stations, retailers, in our rural areas of Nova Scotia because that's what Nova Scotia is all about and it is a very important cornerstone of every community. We thank you for that.
MS. HAZELTON: Oh, absolutely, and I think that more to point though is that these nurses now have choices and that's what my fear is, they have choices, they can go work in the hospital in Canso. So I think that we have to be careful that we don't lose them.
MR. DEWOLFE: We clearly understand that, thank you.
MR. CHAIRMAN: Thank you very much for coming this evening and wish you well. At this time I would like to call witness Beth McNeill. How are you tonight, Beth?
MS. BETH MCNEILL: I'm pretty good. It's a late night.
MR. CHAIRMAN: Yes, it sure is. It's going to be a little later before we're through as well.
MS. MCNEILL: Yes.
MR. CHAIRMAN: Beth, I would just ask that you state your name for the record and continue, please.
MS. MCNEILL: My name is Beth McNeill. I'm an independent dealer in Elmsdale, Nova Scotia. I just want to make a few points before I begin my presentation. In respect to the wonderful margins of 7 cents to14 cents, I'm just wondering if these margins contain the transportation fees and marketing fees that go along with a lot of the major oil companies? I just wanted to make sure that you understand that you look at these different margins apples to apples.
I don't believe that this is the case. I'm really not familiar with that particular company's margins. If that is the case, I would like to know about it. As well, as you just stated, I'm sorry, I don't know all the names of you gentlemen, I'm sorry about that, but the gentleman to your right there?
MR. CHAIRMAN: That would be Mr. DeWolfe.
MS. MCNEILL: Mr. DeWolfe, you had mentioned to the last speaker that you are for the independent dealers in the rural area and, as well, we provide the consumers, the fire department, police and ambulance, and I just want to point that out again. That is very important that we're still around.
I will begin with our company. Again, I say I'm in Elmsdale. Our company has been in the gasoline industry since 1962. We are a small family-owned and operated independent dealer with a major oil company. I married into the family and I think you may have noted that I requested no questions and only because I've only been deeply involved with the company in the last year. If you wish to ask some questions later, I will try to answer them. We have many loyal customers from our community and I know many of them by name. We also have tourists looking for directions and we provide them with information and then direct them to other community businesses in the area. We are a staple in our community and we like what we do.
I'm here today to talk to you about the struggles as an independent dealer. There are many influences, which you have all heard many times, that can determine our margin at the end of the day. For example, again, credit card and debit transactions as well as the price of the delivery of gas per day. When we purchase gas, we pay what is on the invoice. When the price of gas goes down after our delivery, we lose money before we even sell at the pump. If the price goes up after delivery, we do a little dance, but I can guarantee you we don't do much dancing.
I'm surprised at the low number of consumers attending these meetings. However, after today I see there are a few more than at recent meetings. I can assure you that they have lots to say as I hear it every time the price goes up. Some will say that you must be planning a trip, or you must be putting your kids through university. They just don't understand the picture and I'm hoping that after today, or this week gone by, that a lot of consumers are going to be aware of that. Some customers ask me why I don't put my prices down a few cents and how that could create more customers for my business. What they don't know is that I would be selling my product for less than what I had paid. We follow the pricing of the larger volume dealers in the area and if we didn't, they would gobble us up for dinner.
Because we are a small independent dealer, the morning after Hurricane Juan we were able to pump gas using one pump and a generator. We worked all day non-stop. Our community thanked us and we were very happy to help. However, what they don't know is that we had to pay two extra employees that day and we did not make a profit and our customers paid by cash. How we did this was by manual pumps which are old pumps.
During very high prices - I just wanted to make this point, during high prices - in May I believe, it was 99 cents a litre. I'm sure everybody remembers that. Again with our old pumps, you had to manually change the price on the pump, we were selling our full-serve price at self-serve price and because of this physical handicap we could not raise our price any more than 99 cents a litre. We didn't make that well known to our customers, but we had to pay our full-time staff because we also provided diesel fuel at full serve. I just wondered if there were any other dealers out there who came across this, especially in the very rural areas, what would they do if the price went up past 99 cents a litre. I mean you just can't sell for that.
Anyway in my closing statement, I guess I just wanted to say that we as a company have made investment to our community. We are in the process of renovating which took several years to get started. We are in deep right now and the margins were stable when we had planned this project and now they are very unpredictable. We need, not want, but need a stable margin. No one can run a business by hoping to break even at the end of the day. We need to have a stable margin in order to handle our business properly. If this doesn't happen, the smaller independent dealer will not survive. I would like to thank you for listening to my comments.
MR. CHAIRMAN: Thank you, Beth, I have a comment from Mr. Taylor and then from Howard.
MR. TAYLOR: I know you have a very competitive location there and in spite of the fact you were there first or at least . . .
MS. MCNEILL: Yes, that's right.
MR. TAYLOR: Now you're surrounded by Petro-Can and Irving on, you might as well say both sides and I think yes, there's a Wilson's Esso very handy. I'd just like to say to the committee and this audience that McNeill Shell is a very friendly place to stop into and you employ young people.
MS. MCNEILL: Thank you. Yes.
MR. TAYLOR: I know that there was, I think, Ms. Richard mentioned how hard it would be for young people to find jobs, you know, part-time jobs and work like that and they're very friendly and courteous staff that you have there.
MS. MCNEILL: Thank you.
MR. TAYLOR: So, you're doing everything right if you can get a margin that you can live with.
MS. MCNEILL: Yes, that's right and thank you. I did want to comment on that as well. We do have great employees right now and they are very hard to find, a gentleman did speak about that earlier and for minimum wage. I would love to be paying my employees more, minimum wage has just gone up twice in the last year. Of course, we'll pay them, you have to, but some days it makes it tough.
MR. CHAIRMAN: Thank you. I'd like to recognize Howard Epstein, and thank you, Mr. Taylor, I'm sorry.
MR. EPSTEIN: Ms. McNeill, I apologize, I must have missed it. Did you say what community you're in?
MS. MCNEILL: I'm in Elmsdale.
MR. EPSTEIN: The other thing I wondered was whether you happen to know your total volume each year?
MS. MCNEILL: Right now it's at 2.6 million.
MR. EPSTEIN: Has that been steady over time, do you know?
MS. MCNEILL: It has increased slowly. Again, I don't know the exact time frame. I'm going to guess it was three to four years ago we started providing self-serve, obviously, we do both, and we did see an increase in the volume. As you may be aware, the population is growing, it's a steadily growing community. There is a new subdivision going in, which is great for our community. Again, we are putting a large investment into our company right now and like I say, I'm married into it and I'm right along there with them. Someone had mentioned, I'm sorry, one of the gentlemen on this committee, about adding a car wash or convenience store to your business to provide more, well, that's what we're doing. Again, it was several years ago we made this decision to invest in our company and at that time we hummed and hawed whether we were going to go with gas. What do we do? At that point, we made the decision to go ahead and here we are.
MR. CHAIRMAN: Thank you very much for your presentation tonight and good luck with your business.
MR. TAYLOR: A towing service, too.
MS. MCNEILL: Keep plugging away.
MR. CHAIRMAN: He's plugging for you, you understand what he's doing.
MS. MCNEILL: Thanks again.
MR. CHAIRMAN: Thank you. At this time, Darrell Rushton. Do you understand the rules and procedures?
MR. DARRELL RUSHTON: Yes.
MR. CHAIRMAN: Thank you, you've been here a long time. Thank you, sir.
MR. RUSHTON: I'm an independent trucker, and Mr. Taylor, I'm sure you can understand what I'm going through, as well as everybody else. Here's a list of rate increases and decreases. For one month, there's 10 of them. It's hard enough to make a living when you know how much your fuel is going to be, but when you don't know how much it's going to be, it's that much harder.
MR. CHAIRMAN: How much did it go up within the one month? How did it spike? Just roughly.
MR. RUSHTON: From 0.6515 to 0.7965.
MR. CHAIRMAN: How many litres would you use in a month?
MR. RUSHTON: 3,003 to 5,000 litres.
MR. CHAIRMAN: That's a lot of money isn't it?
MR. RUSHTON: Yes, it is. When I bought my first truck six years ago, I went to the bank to borrow the money, mortgaged the house. They wanted a business plan. So I wrote up the business plan, took it in to them, showed it to them. Yes, this is fine. Six years ago fuel was stable. In order to go now to buy a new truck, you can't make a business plan to take to the bank because your fuel is your number one expense. There has to be something done with it. It has to be regulated, whether we like it or not. I don't care if it's $1.20 litre, put it the $1.20 litre and leave it there for two years.
MR. CHAIRMAN: Well, we better not say that, sir. Do you speak to other truckers as well, is this the . . .
MR. RUSHTON: Oh, yes. There's three of my friends that got into it roughly the same time I did. They're not in it anymore and I'm just hanging on.
MR. CHAIRMAN: Yes.
MR. RUSHTON: You know, it just doesn't add up.
[10:45 p.m.]
MR. CHAIRMAN: That's right, I understand that.
MR. RUSHTON: Put it at $1.20 litre and leave it there, like the other gentleman said, for two years and if the price of crude goes down at the end of that two years, well, put fuel at 35 cents a litre and leave it at 35 cents a litre for two years.
MR. CHAIRMAN: Well, sir, you're certainly entitled to your opinion and thank you for that tonight.
MR. RUSHTON: It's just that's the way I see it, and there's a lot of other guys out there in the same boat. Same with people who drive back and forth to work.
MR. CHAIRMAN: As a small business person I understand . . .
MR. RUSHTON: There's no way you can budget for it. It's just not there.
MR. CHAIRMAN: Yes. Would you take a question from Mr. Taylor?
MR. RUSHTON: Sure.
MR. CHAIRMAN: Mr. Taylor.
MR. TAYLOR: Yes, Darrell, how many rigs do you run?
MR. RUSHTON: Just the one.
MR. TAYLOR: You just have the one?
MR. RUSHTON: Yes.
MR. TAYLOR: Can I ask? What do you usually haul?
MR. RUSHTON: I haul wood products, forest products.
MR. TAYLOR: You haul forest products?
MR. RUSHTON: Yes.
MR. TAYLOR: You used to be able to get your fuel at the mill. Do you still do that?
MR. RUSHTON: Yes, you can, but you don't get any deal on it.
MR. TAYLOR: You don't get any deal?
MR. RUSHTON: No, no.
MR. TAYLOR: I think you were more or less making a statement of $1.20 in (Interruption) a sense, for planning. I think the point is well taken that it's such, as far as fuel prices go, the spikes are so hard to deal with that you can't do any planning.
MR. RUSHTON: Exactly.
MR. TAYLOR: I guess the only thing I would say, having a little knowledge of the trucking industry is that if the $1.20 is justified, by some form of using the R word, regulation, I guess it would give you confidence that what you're paying is fair and it gives you a little stability for going up and down the road and hauling wood.
MR. RUSHTON: Yes, you can go after that rate increase to compensate for that $1.20 and you know that's what it's going to be for two years, which is what has to happen.
MR. TAYLOR: You run a diesel engine I trust.
MR. RUSHTON: Yes.
MR. TAYLOR: It is a fairly new machine?
MR. RUSHTON: It's a 1997. It's fuel efficient. It's economical.
MR. TAYLOR: Yes, it would be. Computerized?
MR. RUSHTON: Yes.
MR. TAYLOR: A nice one.
MR. RUSHTON: Anyway, that's all I had to say.
MR. CHAIRMAN: Do you have a sleeper on the back of it, sir?
MR. RUSHTON: Yes.
MR. CHAIRMAN: Could we get a copy of . . .
MR. RUSHTON: I'll tell you what I'll do, I'll leave all these with you.
MR. TAYLOR: If you could just leave a sample or an example of some of those spikes just for our future deliberations, Darrell, it would be helpful.
MR. RUSHTON: You can have them and study them.
MR. TAYLOR: Do you want copies back?
MR. RUSHTON: No, but this is one year's worth, or 14 months of price fluctuations. Some of them there's as many as four in one week.
MR. CHAIRMAN: He's going to pass them to Kim. Sir, we thank you for coming tonight because I think you're the first independent trucker that has presented.
MR. RUSHTON: Is that right?
MR. CHAIRMAN: So, we do thank you, another side to it.
MR. RUSHTON: Okay, thank you very much. I appreciate it.
MR. CHAIRMAN: Good sir, good luck to you. I also now would like to call Dan MacEachern please. Is Dan still with us? How are you tonight, sir. Good, Dan. Dan are you familiar with the proceedings?
MR. DAN MACEACHERN: Yes.
MR. CHAIRMAN: Thank you. I don't have to go through that. State your name for the record, sir and start your presentation.
MR. MACEACHERN: Dan MacEachern. I think I'm going to throw you off on a totally different scenario.
MR. CHAIRMAN: Okay.
MR. MACEACHERN: I'm a consumer again. Mr. Howard Epstein, commented on the Iraq War.
MR. CHAIRMAN: Yes, sir.
MR. MACEACHERN: I wasn't very proud of that, what the North American people did to the Iraqis, but, that's getting off the point. I would like the media - you're going to have another forum some place else?
MR. CHAIRMAN: No, sir, this is the last one.
MR. MACEACHERN: Well, I guess it's over and done with. The media could probably go through the archives to find out what I'm going to talk about. This is some history.
Back in the early 1970s when I was a young man, there was a scenario in Prince Edward Island where a man had a Chrysler car and it had phenomenal gas mileage. He took the Premier from Prince Edward Island to Halifax to meet our Premier, and I think also from New Brunswick. What happened at that time? The gas companies, did they not buy him out, the gas prices have risen to where they're at now.
I think Nova Scotia is far too small with 1 million people to do too much about the gas prices. If you politicians and the media were able to push this to make something of it to bring it to the news across Canada and push it, hopefully we could bring down the price of gas because of something that happened approximately 30 years ago. It should be well documented in the CBC, in the newspapers and whatever of those years. But if tonight is the last night, probably you'll never think of it again.
MR. CHAIRMAN: Sir, tonight is our last night for public presentations. Our work is really just starting. I did hear at one time the story that you're speaking of, the incident. I don't know if indeed it's actual, but we certainly could look at it.
MR. MACEACHERN: Well, it was well broadcasted at the time. I was just a teenager at the time.
MR. CHAIRMAN: I was very young at the time and I can remember it.
MR. MACEACHERN: It was a carburetor . . .
MR. DEWOLFE: And it got phenomenal gas mileage.
MR. CHAIRMAN: Anyway, continue with your presentation.
MR. MACEACHERN: Basically, this is what I wanted to say. Nova Scotia is too small to ever fight the American corporations that control our gas, heating oil and diesel.
MR. CHAIRMAN: Thank you, sir. We appreciate you waiting and thank you for your presentation as well.
Charles Wight? Sir, you're the last presenter tonight that is scheduled so I must say, if there is anyone else, you still have time to give your name to Kim down back because we want to make sure that everyone has had an opportunity to present tonight. Sir, I'm sure you know the procedure. State your name for the record and continue please.
MR. CHARLES WIGHT: Mr. Chairman, my name is Charles Wight. I'm a private consumer.
First of all, let me express my thanks for the opportunity of attending this meeting and voicing my opinions and concerns about the increasing prices of fuel. It is my belief by holding these forums throughout the province, the government is indicating that they are ready to listen to recommendations from citizens. I trust you realize that a large number of people are not here this evening - not because they aren't interested in the issues, but because they've been led to believe there's no point in expressing any concern. A number of people have relayed to me that they feel overwhelmed, crushed and beaten which has resulted in learned helplessness.
I would like to remind you that the fabric of our society in Nova Scotia is made up of working people, small business and the primary industries: fishing, farming, logging, construction. The price of fuel has far-reaching effects on individuals, families, those living on fixed incomes and businesses. It adds to the day-to-day cost of living and affects all aspects of private and business life.
As our services have been increasingly more centralized in the urban centres and with limited public transportation, there have been increased demands for private transportation. The government states it is concerned about people leaving rural Nova Scotia, but, in fact, they are forced to leave the rural areas because they can't afford to commute to the centres for the required services. This has led to more congestion, problems with infrastructure and social programs, demands on urban centres have become increasingly difficult to meet. At the same time, you can drive down any country road and see many for sale signs on the properties there.
To address the subject of fuel subsidies, while some businesses are subsidized, other are not. This has made for an unlevel playing field. It is my belief that taxpayers shouldn't have to bear the financial burden of fuel subsidies to ease the cost of freight, which is basically caused by outrageous and unpredictable fuel prices. In other words, we need to fix the problem and not just band-aid the symptoms.
The apathy the taxpayers feel toward government is centred around the perceived lack of concern that government seems to have about the problem. This is primarily due to the large amount of tax dollars that are realized from the higher prices of fuel. Most citizens are concerned about the apparent lack of support the government gives to problems like this. For example, there's no ceiling on fuel prices, however, there are firm controls on other businesses such as primary industries - loggers, agricultural businesses are given definite limits and this has created an imbalance.
In Monday's Truro paper there was an article outlining that Ireland is among the top developed countries and yet the UN poverty index has consistently related Ireland as having the highest percentage of poor people in Western Europe. If we are not careful, it would appear that we are headed in the same direction. Furthermore, if the various Parties of the federal and provincial governments would focus their efforts to work together collaboratively and put aside personal attacks and criticisms, maybe we could unwrap any hidden agendas that inhibit progress toward a solution.
The citizens of this land would be shocked if they knew how badly the oil companies are misrepresenting the actual prices of crude oil. Oil companies are leading us to believe that they are paying outrageous prices for their crude oil. The ChronicleHerald documented last year that an Alberta oil company was purchasing oil from Yemen for the price of $2.75 per barrel. On the other hand, the Canadian Government has been leading us to believe that the cost of crude oil is approximately $40 per barrel. However, they don't produce any concrete information to explain the enormous gap between the $2.75 and the $40.
Also, the price goes up immediately as soon as announcements are made about changes in the price of crude raising, the price on fuel already in local holding tanks. One must ask the question, where is the extra money going?
In conclusion, the fact that you have organized these meetings is certainly a positive step in the right direction. Thank you again for allowing me to present some ideas and concerns. Forums such as this will enlighten the public and allow people to become knowledgeable about the facts. Let's hope that these will form some sort of advocacy bottom-up theory that will bring about positive changes and not just lip service. I am confident that if the committee will take the information and act upon it, our province and its people will reap the benefits and will have far reaching effects. Then we can look forward to common goals and the betterment for all society.
MR. CHAIRMAN: Thank you for your presentation tonight. I don't see any questions, so we bid goodnight to you. Thank you for coming.
MR. WIGHT: Thank you.
MR. CHAIRMAN: Ladies and gentlemen, this brings the final public round of meetings to an end. Before I dismiss you, I'd like to thank a number of people - the press who have been reporting fairly; to Kim down back and our staff people, thank you very much for your kindness, you're doing an excellent job; and, of course, my colleagues, the committee members. I speak highly of their maturity and the way they're approaching this and we have many hours to work together to achieve our goal. To the people of Nova Scotia, the retailers, the consumers, the industry, we would like to say that we're working in the best interests of the people of Nova Scotia.
Goodnight audience and thank you for your patience.
[The committee adjourned at 10:59 p.m.]
