Why is gas so expensive in Canada?
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Summary
In this episode, we talk with Dan McKagg, the President of Canadians for Affordable Energy and former Liberal MP and former MP on the Liberal committee on gasoline pricing. We discuss the recent report from the Competition Bureau suggesting that there may be anti-competitive conduct guiding gas prices across the country.
Transcript
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let's talk about one thing we can find a lot more unanimity on among this audience i suspect which
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is the uh devastating impacts of the carbon tax one of many not the only thing driving up the
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cost of living but it is in fact doing it now that being said there is an interesting piece
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that i wanted to get to on gas prices generally which is that the competition bureau is suspecting
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there may be a little bit of anti-competitive conduct that is to use the watchdog's word
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guiding gas prices the competition bureau is looking at a company called calibrate canada
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which they suspect is guiding gas prices at 100 or 1700 fuel stations across the country
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if you want to understand fuel prices there's only one guy in canada that knows everything about
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them and that is our good friend dan mctagg who is the president of canadians for affordable energy
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and also a former liberal member of parliament back when that meant something very different from what
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it does today dan it's good to talk to you thanks for coming on today good to be here andrew and thank
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you for the invitation i didn't realize gasoline was uh such a big deal these days it certainly
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wasn't with the competition bureau 40 years ago 30 years ago when it was after this file
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but glad to see that they're on it nevertheless yeah it was it's interesting because i think
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anecdotally everyone would assume there was some sort of a passive collusion going on because you
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know everyone has seen the intersections with three gas stations where one drops their price and then
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you know half an hour later the next one does and then half an hour after that the other one does
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but but what is it they're actually thinking is happening here that may be illegal potentially
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well i think they're probably looking at conspiracy which is that uh the you know a couple of these
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gas stations are gathering in the dark of night under you know dimly lit lamps on some street corner
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and saying hey this is the price we're going to be setting for the next several days they may also
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be looking at the wholesale price of gasoline which uh brings us into the whole ambit of you know why
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are wholesale prices very similar between competitors um this of course has always been a concern
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that you have you know three or four suppliers shell sorry excuse me pedro canada uh imperial
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being the big players across much of canada of course there are regional players irving in the east
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coast and uh to the west uh west coast chevron of course now of course which is uh uh parkland
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refinery in in uh in uh in vancouver uh these are smaller players but they tend to look at the wholesale
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price of gasoline they look at the canadian dollar and they come up with a uh formula which basically
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suggests which way the price is going to go now in some parts of the country it's usually 48 hours
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after the price or 36 hours i should say after the price is settled on u.s markets uh we get a wholesale
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price indication that doesn't necessarily mean gas stations need to jump on it but in most major
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cities across canada they do which of course is the reason why i began predicting gas prices well over
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30 years ago um at the same time i was out writing a little report that lost in time reported the
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liberal committee on gasoline pricing canada you'll see uh it's about 26 years old and uh yours truly
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was was chair of that at the time i was concerned about the loss of competition particularly among
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retail uh gas stations however this is always going to continue to be an issue we know that
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gasoline prices tend to be also diesel prices tend to be jet fuel prices tend to be
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heating home heating oil prices and so where energy prices go and how their influence
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do with i think not just the political direction of this country but the whole issue of affordability
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which is something i've been on for several years as you can see from above i have every expectation
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that the competition bureau of course is being guided by new uh mandates uh the mandate of course would
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be uh you know nudge nudge nudge wink wink we uh we want to make sure that there's no green washing
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that is to say people making claims that they're doing something clean uh quote unquote uh anti-fossil
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fuel uh when in fact they're not uh and so i think the the bureau itself has now gone from being you know
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a defender a cop on the beat when it comes to competition to uh bringing in inviting some of the
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political partisan considerations including climate change and of course uh the all the issues that
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many taxes that go with it enter how many independent variables are there that are inputs
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to gas prices in canada we have uh you have to watch in canada eastern canada so atlantic canada
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quebec and ontario tends to follow the new york uh mercantile exchange or the the market at new york
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is where our wholesale price comes from and that varies by day so if we're on a day like today where
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it's up a couple pennies that could mean a one cent increase a couple pennies a gallon could mean a
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center to increase come 24 hours 48 hours from now so uh we're likely looking at a scenario where that
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would happen by friday um western canada so from thunder bay if you can believe it or not right up to
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the uh right up to vancouver's uh limits uh the lower mainland is another market and that's really
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driven by the chicago spot market and of course we have uh the vancouver lower mainland and victoria
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so vancouver island is also influenced by what's called the pacific northwest uh market and that of
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course means whatever happens in the united states tends to be the price we're going to pay within 48
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hours at least gas stations will be forced to pay uh and including you have to include in that of
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course the value of the canadian dollar very important to recognize because andrews uh many people
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tend to overlook in their so-called you know millions of dollars in federal government subsidies
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to come up with these studies uh that uh surprise nudge nudge wink wink antenna support the government's
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position they tend to overlook the fact the canadian dollar continues to sink in 137 pennies
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to buy one us dollar adds about 24 to 27 cents a liter to the price of gasoline and that's not even
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including the issue of taxation they not the one but the two carbon taxes that we now have in canada
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and to go back to the retail aspect of this how much latitude do uh gas companies have do you know
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pumps pump stations have in their prices when these are going up and down i know costco you know
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locally is notoriously good for having a few cents uh less but but but how much of a buffer do they
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really have to to pad that out if they want to undercut their their competitors well you have to look
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at what's called a retail margin and you have to look at your market if you have a lot of people
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coming through so what they call throughputs you have a lot of uh you know 20 30 000 liters a day
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and you have several hundred cars coming in then you know your your margin doesn't have to be as
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high it could be seven six five cents at costco or you have other ways of cross subsidizing that as
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costco would for instance with uh you know with uh uh rewards programs or better yet uh you know you
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paying 60 65 dollars a year to uh to have access to their pumps i can't just walk into their pumps
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without showing my you know my costco uh uh membership uh before getting that so that's a
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bit of an advantage also the amount of fuel you can use if you can walk in and say hey listen i can
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move a million you know liters of gasoline and one given a week or diesel the equivalent or supreme
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you're going to get the attention of the refiner because the refinery runs you know 24 7 365 days a
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year and so uh those who can move volumes tend to get a little bit of a better discount than say
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you know barney's bait and tackle and uh you know gasoline emporium uh would uh in an off-site
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you know a situation where they don't get a lot of traffic nevertheless it takes everyone pays
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within a few cents the same for wholesale price of gasoline there are discounts casco costco might
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get on a day like today where they rack price that the so-called wholesale price uh you know say for
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uh regina being a dollar 4.9 might be buying it for 99 cents so they get five cents off any
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competitors in the area because of the large volumes they can move uh they still have to have
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a retail margin in order to cover the cost of honoring credit cards cost of uh you know of
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keeping the plaza open paying the staff or whoever is there and that's why you know you can't do these
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things for free we often see many variations in prices across the country even within cities where
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some gas stations tend to have a lower price than others they hope that they can get more attract
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more to their station by you know lower slightly lower prices but the really i think the story
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here and i've said this for some 30 odd years now is that the real competition is at the retail level
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the last eight or nine cents a liter and that's what it comes down to eight or nine cents is all
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the gas station has control over and so you know if they suddenly remove that after 5 p.m in a given
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afternoon and have zero margin they're running seven cents lower than everyone else obviously they're
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going to get most of the traffic and there are many websites some which i've worked with in the past
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gas buddy for instance which are devoted to letting people know when that happens how that happens where
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the best deals are i wanted to just in in the last couple of moments i have with you here
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point you to this tweet ryan turnbull who's a liberal member of parliament had shared uh this he
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says a new report says canadian carbon tax did not cause hike in gas prices or inflation the
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conservatives will deny this at all costs they just can't handle the truth so i would say and
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i think you would agree that we can't say every increase in gas price has been attributed to the
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carbon tax but the design of the carbon tax was to increase gas prices that was the point of it so
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i don't know how the liberals are saying that there is no connection to increases and the carbon tax
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it makes no sense and i was member of parliament for whitby for several years uh so i mean i know where
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mr turnbull is trying to come from but when you get an organization that you pay 35 or 50 million
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52 million to to come up with some kind of weird study that doesn't include some experts who know
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what the hell they're talking about i.e me uh you know that there's a problem and uh you know that
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this is uh from a political point of view and i'll put my 18 years as a liberal member of parliament
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uh hat back on and say either you do want the carbon taxes to work to deny and to encourage people
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to or discourage people from buying fossil fuels or you don't and uh so it's an argument if he's
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making the argument this isn't inflationary then it obviously is not working which brings into
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question mr turnbull and the liberal party's attempt at trying to suggest that carbon taxes
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are indeed useful in fact they're extraordinarily expensive canadians understand that uh most do not
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get back what they put in and not we're not just talking about fuel for transportation but also uh you
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know energy costs uh things like keeping your your home heated uh and the cost generally as it cascades
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through the economy of all these things you know we have a country with two carbon taxes virginia
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being a very good example where you have 17.61 is the first carbon tax the second the clean fuel
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standard the bc lcfs short for bc low carbon fuel standard um about 18 19 cents a liter now and that's
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gonna be surprising i fought the government over there many years ago on this point when they said there
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was 12 mystery cents it's actually about 18 or 19 now and that's because the cost of a credit carbon credit
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which is about 500 which british columbia is very transparent about it's 500 bucks per credit
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for every 110 dollars is four cents a liter so for that's according to the federal government's own
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uh um uh riaz or uh regulatory implementation act uh study so for every 110 dollars of carbon credit
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which is 500 today in british columbia it's four cents four cents times uh a break in 110 to five
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from 500 you're talking uh uh 15.8 plus gst so you're about 18 cents a liter roughly for the second
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carbon tax that's what's adding the cost of living more importantly last year at this time
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canadian dollars 131 pennies to buy us dollar today 137 that's adding about two cents a liter the price of
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gasoline that's a function of the fact that uh the world has very little interest in buying canadian
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commodities and canadian currency it's a a tragedy uh before i let you go dan when should i fill up
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well this weekend looks pretty good i would say uh by friday you'll see prices drop a little bit more
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than they are now and right across the country an average decrease of about two cents a liter so
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i'm waiting until friday to fill up uh some can get it take advantage of this tomorrow if you're in
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canada i've just given the information out there uh diesel down two cents gasoline down 1.5 that's
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likely to be good for thursday and friday quebec ontario uh it's pretty much the same down about a
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penny and of course western canada you've seen prices spike up they're likely to drop about two
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cents a liter uh with the lower mainland vancouver staying in the 181 181 183 range all right well
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you heard it here first first everyone uh dan mctagg president of canadians for affordable energy
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thanks so much for coming on dan really good to talk it was a pleasure thanks for having me
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thanks for listening to the andrew lawton show support the program by donating to true north