[TORONTO, ON] - Federal Industry Minister Tony Clement is planning to invite the companies responsible for setting gasoline prices to Ottawa to explain the high cost and volatitily that has been putting a strain on Canadian wallets in recent months.
As gasoline prices dipped Thursday, reversing spikes earlier in the week, Clement said the Conservative government will ask refiners, distributors and retailers to appear before a parliamentary committee and explain their pricing methods.
“No-one can understand why last year when oil per barrel was around $140 or $150 we were paying $1.37 per litre, when this year oil is south of $98 a barrel and yet we're paying more,” Clement told a news conference held outside the home of a north Toronto MP.
“No-one understands how that can happen,” Clement said.
“That's just one issue. There's a lot of issues that have to be addressed, people deserve the answers to these questions.”
The reasons for the rising price of gasoline vary - ranging from higher crude prices on the back of a falling U.S. dollar and Middle Eastern political instability to speculation in wholesale markets.
As well, there are fears that refinery closings in the U.S. Gulf states from springtime flooding on the Mississippi River could cut gasoline supplies. In Canada, new consumption taxes on gasoline in Ontario have raised the price in that province since last summer.
Clement did not say when meetings between the government and fuel producers would take place, nor whether any of the producers or retailers had indicated they'd even be willing to appear before a committee.
The announcement came as motorists welcomed a downswing in pump prices as the average cost of a litre of regular fell in most provinces, as much as 3.8 cents in Ontario and two cents in New Brunswick. That was a retreat from prices that had gone up 6.5 cents a litre on Tuesday in much of Ontario, Montreal and Vancouver, then by another 2.5 cents per litre on Wednesday.
The American Petroleum Institute reported Wednesday that the supply of refined gasoline is getting tighter with U.S. inventories dropping for 11 straight weeks. There has been a steady rise in wholesale gas prices and refiners' profit margins, known as “crack spreads,” as oil supplies tighten just as peak summer driving season approaches.
While oil prices are driven by the ability to pull crude out of the ground and global energy demand, refiners try to gauge how demand for their product will be affected by factors such as weather, seasonal driving and refinery capacity. Then they set what they will charge retailers based on that demand forecast.
Some observes have said those margins, which sit at multi-year highs, should decrease going forward, and crude prices should remain flat.
It's not certain how far the federal government will go to deal with high gasoline prices, which Clement conceded is putting pressure on Canadian household finances.
Explaining the industry's economics at a Commons committee may not satisfy hard-pressed consumers, many of which want tougher action to stem the rise in fuel costs.
However, past reviews by the federal Competition Bureau have not found evidence of collusion or price fixing in the refinery sector, which has to deal with a North American-wide market and the volatility of energy trading on commodities exchanges.
However, there may be pressures on the government to impose an excess profits tax on the oil industry as Britain's government did earlier this year when world oil prices rose.