Industry Gas Price Attack Backfires

As we get closer to the election and as it becomes apparent that the result will be one that no-one expected with it was called just weeks ago, the attacks from Steven Harper’s supporters in Canada’s business elite are beginning to mount.

One of the latest is the claim from University of Calgary  professor and Imperial Oil Limited director Jack Mintz, who Tweeted his claim that the NDP’s greenhouse gas emission program would raise gas prices by 10 cents per litre. On a closer review, it turned out that Mintz’ calculations were based on a mistaken assumption about the design of the NDP proposal – he assumed it would be applied to gasoline at the retail level; the actual proposal is to have the proposal apply to production, rather than consumption.

The independent Alberta environmental think tank, the Pembina Institute, estimated a 4 cent per litre impact. More to the point, the NDP’s proposal is explicitly designed to redirect the proceeds from sale of cap and trade rights into support for consumers’ energy saving efforts, energy conservation more generally and renewable energy research and development and production.

But in attacking the NDP’s greenhouse gas emissions proposals, Mintz shines light on the Canadian oil and gas industry’s consistent opposition to climate change and the spectacular excess profits being generated by the industry, at Canadian consumers’ expense.

The Canadian Centre for Policy Alternatives’ Gas Gouge Meter http://www.gasgouge.ca/ measures in real time the difference between current retail prices in twenty cities in Canada and what would be a normal price, based on current crude oil prices, current exchange rates and normal profit margins for gasoline refining, distribution and marketing.

The Gas Gouge Meter has been running for nearly six years, ever since concern about the impact of hurricane Katrina gave Canadian refiners the excuse to push retail prices for regular gasoline over $1.00 per litre and their profit margins above 30 cents per litre in some parts of Canada.

On Friday, the day after Mintz launched his salvo against cap and trade, revealed a gap between normal prices and market prices in major cities from 12 cents per litre to more than 20 cents per litre.

As the table shows, in most Canadian cities, gas prices were 12 to 15 cents per litre above normal prices, with Victoria BC an outlier on the low side at 6 cents and Ontario cities in the 18 to 21 cents per litre range.

A few cents per litre may not sound like much, but a retail price gain of 1 cent per litre charged for one day in Canada is worth $1 million in extra profits to the Canadian oil industry.

So even the low-end estimated price gouge of 12 cents per litre, sustained over a year, would generate extra profits of $4.4 billion.

Appropriately, on the same day that Jack Mintz launched his attack on the NDP’s climate change policy, Imperial Oil reported a quarterly profit of $781million for the first quarter of 2011 featuring a gain in refining and marketing margins of $175 million.[1]

So does Mintz’ attack on cap and trade reflect a real concern on the part of the industry about its alleged impact on consumers, or an effort to deflect attention away from its gouging pricing practices, bloated profit margins and excessive profits?

You be the judge.