WHEREAS the continuous increase of gas prices is seriously affecting rural communities and especially seniors, who have to travel long distances to obtain essential services, primarily in the health sector: THEREFORE BE IT RESOLVED that the Government of Canada and BC, with the support of local governments in BC through UBCM, develop strategies to deal with the escalating cost of gasoline and other petroleum products.
Ministry of Energy, Mines and Petroleum Resources The gasoline industry in Canada follows economic rules of supply and demand over which it has little control. Gasoline and other petroleum product prices increased sharply in 2005, due to concerns about global supply, and Hurricanes Katrina and Rita seriously affecting production in the Gulf of Mexico. In Vancouver, prices peaked at 114.7 cents per litre of regular unleaded gasoline on September 6, 2005. On December 13, prices retreated to 89.6 cents per litre. Assuming a mid-size car, driving a distance of 20,000 kilometres annually, with a mix of 55 percent city and 45 percent highway driving, the fuel cost based on an 80 cent per litre of regular unleaded gasoline is 1,410 per year. With 100 cents per litre, the cost increases to 1,760 per year. At 120 cents per litre, total fuel cost climbs to 2,112 per year. Despite the recent hike in prices, gasoline demand has not fallen. As gasoline purchase represented only 3.5 percent of Canadians after-tax income in the second quarter of 2005 up only slightly from 3.1 percent early in 2004 and 3.2 percent in 2000, according to Statistics Canada information the increase in prices still has little impact in terms of consumption. Gasoline prices are not regulated in British Columbia, but set by market forces. The price of gasolines major input, crude oil, is determined outside Canadas borders, in world markets highly influenced by the Organization of Petroleum Exporting Countries decisions and fluctuations in supply. While provincial governments have the authority to regulate retail prices, most provinces prefer to allow market forces to determine gasoline prices. The Federal Government has no jurisdiction to directly regulate retail gasoline prices or to determine the reasonableness of pricing, except during national emergencies. In Canada, the only jurisdictions where gasoline prices are regulated are Prince Edward Island and Newfoundland and Labrador. Evidence does not suggest this practice is useful. There are four factors that influence gasoline prices in British Columbia: o World oil prices: Canada is a price taker in the crude oil market. That means that the price is settled in the international markets and Canadian producers cannot influence international prices with their level of production. As of December 2005, crude oil feedstock costs represented about 50 percent of regular gasoline pump price in British Columbia; o Refinery margins: The refinery margin is the cost of processing crude oil to produce gasoline. Refining margins were about 6.5 percent of regular gasoline pump price in British Columbia in December 2005 about 6 cents per litre. This margin is very volatile, but is in line with average Canadian and American margins; o Taxes: The Federal Government imposes a 10 cents per litre federal excise tax and the seven percent Goods and Services Tax GST on gasoline purchases. British Columbia fuel taxes for gasoline range between 14.5 cents per litre and 20.5 cents per litre depending on the location. This rate includes 6.75 cents per litre dedicated to the BC Transportation Financing Authority. Gasoline purchases in the Greater Vancouver Regional District pay a 12-centlitre tax dedicated to Translink. Gasoline purchases in the Capital Region District include a 2.5 centlitre BC Transit tax. Total taxes federal and provincial in British Columbia were about 36 percent of the gasoline pump price in December 2005. The Province does not collect more taxes when pump prices increase fixed amount per litre. The Federal Government collects more taxes only through the GST percentage of price; o Retail marketing Margin: The average margin on gasoline prices regular gasoline pump price surveyed by early December 2005 was 5.4 cents per litre in Canada, representing approximately 6.1 percent of the pump price. In Vancouver, retail margins fluctuate in the 2 to 7 cents per litre and are frequently negative as it is a very competitive local market; retail margins are usually in the 10 cents per litre range in Victoria and Prince George and in the 6 cents per litre range in Kamloops. In summary: volatility in gasoline prices is a direct result of the competitive nature of the business at the street level. Differences in gasoline prices between cities are generally influenced by the different competitive conditions found at the street level. Many investigations at the federal, provincial and private level have found there is no evidence of collusion or price-fixing in the retail gasoline market.
PRIME MINISTERS OFFICE Liberal Government On behalf of the Right Honourable Paul Martin, I would like to acknowledge receipt of your letter of October 25, with which you enclosed several resolutions of the Union of British Columbia Municipalities UBCM. You may be assured that the view expressed in the resolutions have been carefully considered. As copies of your correspondence have already been sent to the Ministers within whose responsibilities these matters fall, I am certain that they will have appreciated receiving this information.