Agenda Item No.:__D.2.a.________

Gasoline Prices in Edmonton (R. Hayter)

Recommendation:That this report be received for information.

Report SummaryThis report provides a response to an Administrative Inquiry regarding legal or legislative mechanisms available to protest against gas price increases.

Previous Council/Committee ActionAt the City Council meeting held on July 2, 2002, Councillor R. Hayter made the following inquiry:

“There appears to be no rhyme or reason to gasoline prices in Edmonton, and they seem to go up at the whim of the oil companies, especially when a holiday is near. About a week or so before Canada Day, without justification, prices at the pump increased 4 cents a litre.

During a recent trip to Ontario, I observed that gas prices were as much as ten cents a litre cheaper than in Edmonton.

In some Provinces, such as Prince Edward Island, there are regulatory watch-dogs that protect their citizens against such price gouging.

Is there any legal or legislative mechanism available to City Council to protest these unwarranted increases on behalf of our citizens?”

Report The price of gasoline reflects the cost of

crude oil, taxes by various levels of government, refining costs and retail

costs. Nearly 50% of the price of gasoline comes from taxes. The price of crude oil, the next largest component of cost at 35%-40%, is a commodity cost that varies depending on inventories of crude oil and production levels agreed upon by the Organization of Petroleum Exporting Countries (OPEC). Refining costs amount to approximately 10%- 15% of gasoline costs, leaving only a small margin of costs for gasoline retailers.

The Conference Board of Canada published a 2000 report that looked at the way in which domestic retail and wholesale gasoline markets work and how gasoline prices are determined at the pumps. The report concluded that gasoline prices rise and fall in unison based on supply and demand, the intense pressure of retailers to remain competitive with the lowest price, and the volume of gasoline sold by a particular retailer.

Gasoline prices are not regulated in most Provinces, including Alberta. Any request for a regulatory role by the Energy Utilities Board or other appropriate tribunal would require legislative changes. If gasoline were treated like other regulated commodities, the cost of regulation would be built into the retail price of the gasoline.

City Council could file a complaint with the Federal Competition Bureau under the Competition Act. The Bureau would examine whether there was any evidence of a deceptive business practice that would justify a formal inquiry. The Conference Board of Canada report

Routing: City CouncilDelegation: Randy GarveyWritten By: Marta SherkJuly 23, 2002 Corporate Services DepartmentFile: 2002COL024 (Page 1 of 2)

D2a

Gasoline Prices in Edmonton (R. Hayter)

notes that there have been more than 20 gasoline pricing inquiries over the past several years but that no past study has uncovered any evidence of illegal or anti-competitive behavior within the gasoline industry.

City Council could direct an inquiry to the Federal Ministry of Industry or could direct complaints directly to gasoline retailers.

Background Information Attached1. The Conference Board of Canada - “The

Final Fifteen Feet of Hose: The Canadian Gasoline Industry in the Year 2000”.

Staff Hours to Prepare Report: 2Staff Cost: $370.00Total Cost of Inquiry Preparation: $370.00

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The Conference Board of Canada – The Final Fifteen Feet of Hose: The Canadian Gasoline Industry in the Year 2000

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The Conference Board of Canada – The Final Fifteen Feet of Hose: The Canadian Gasoline Industry in the Year 2000

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The Conference Board of Canada – The Final Fifteen Feet of Hose: The Canadian Gasoline Industry in the Year 2000

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