FREDERICTON, N.B. -- Some motorists across the Canadian province of New Brunswick had to search for gasoline Tuesday after almost 100 independent gasoline retailers turned off their pumps for several hours to protest price regulation, reported the Canadian Press.
Gas station attendants told motorists they had no fuel to sell, or that they couldn't afford to sell it at the regulated price set by the province's Conservative government when regulation came into effect on July 1.
Some stations that remained open had lines because [image-nocss] of vehicles diverted from other locations.
Hermel Michaud, who owns Shell stations in Grand Falls and St. Leonard, N.B., shut off his pumps Monday morning and refused to wholesale gasoline to 24 other stations in northern New Brunswick. Were losing too much money, he said, adding that unless those 24 stations buy gasoline from someone else, they will run out soon. He said the regulated maximum price of $1.12 has left him with a profit margin that is too slim to cover his costs. The margin is about two cents a liter at full-serve, and if you are selling self-serve you are losing money, he said. We're not against regulation, but it's not made for our retailers to survive. It is made maybe for the majors to survive, but not the independents.
Kevin McCann, the New Brunswick sales manager for Wilson Fuels, said independent retailers operating under the Ultramar, PetroCan, Shell, Esso and Wilson banners took part in the protest. Most had begun pumping gasoline again by mid-afternoon.
Customer Angela Andrews went to three gas stations in Fredericton before finding pumps that were working. "I think the government should let the gas stations set their own price, if they want to raise it or lower it," she said.
The province set a maximum price of $1.12 (99 cents U.S.) per liter (one liter equals 0.264 gallons; 1 gallon equals 3.79 liters), but has allowed retailers to add a couple of cents to cover transport costs.
The retailers say, however, that the government has done nothing to ensure there is a profit margin when refinery and wholesale prices rise. The formula used to set the price allows for a six-cent-a-liter profit margin for wholesalers and five-cents-per-liter for retailers.
McCann said there is not a lot of choice when there are only two refiners in the Maritimes. "You've got Esso or you've got Irving, and guess what? Their pricing is virtually the same," he said.
Energy Minister Brenda Fowlie defended the new regulation system, but she also opened the door to possible changes to the legislation. She said she is willing to allow the dealers and wholesalers to renegotiate their contracts and profit margin, but it has to stay within the 11-cent range set out in the legislation. "If the retailers and wholesalers feel they can't work within their margin percentage, one or all could make application to the Public Utilities Board, and if they were successful, it would apply to all wholesalers and retailers in the province," she said.
But McCann said the minister is starting with the wrong reference point, because the government uses the benchmark price of oil sold in New York when setting the maximum price for gas in New Brunswick. "She's using New York Harbor, and we don't buy New York Harbor and none of the other wholesalers in the province buys New York Harbor, they buy off the Saint John [N.B.] rack, so that premise is out the door even before we get started," he said.
The New York price is about 3.3 cents a liter lower than the Saint John rate.
The Nova Scotia and Prince Edward Island governments also use the New York rate to set their regulated prices, but McCann said both have set maximum pump prices at about $1.15 a liter. "That extra 2.5 cents goes a long way in this business," he said.
Dan McTeague, an Member of Parliament (MP) from Ontario said Provinvial Premier Bernard Lord should be lobbying Ottawa for changes to the Competition Act because there are only two wholesalers in the province. "With a dysfunctional gasoline market in which one or two players basically control the price at wholesale, you have a very serious situation," he said. "They inflate the refinery price and they compress the retail price to such an extent that the retailers go out of business."
Meanwhile, Tom Adams of the Toronto-based research group Energy Probe said the government can't ensure lower prices for consumers in the long term through regulation. "There's nothing that politicians or regulators can do beyond tax relief to change the game," he said.
Rick Brewer, a Liberal member of the legislature who leads an opposition party task force on petroleum pricing, said the province rushed regulation without weighing all the possible repercussions. "The premier said that if this didn't work he would pull the regulations back off the table," he said. "How long will the premier make New Brunswickers suffer by not getting a commodity like gasoline, which is a necessity today."
Gas prices in New Brunswick are about the middle of the pack in Canada. According to the weekly survey of pump prices by M. J. Ervin & Associates, Calgary, Ont., issued on Tuesday, the highest prices was in Whitehorse at $1.22 per liter. The lowest price was about $1 per liter in St. Catharines, Ont.
Meanwhile, motorists in Ontario faced with wildly fluctuating prices at the pumps deserve a provincially regulated gasoline pricing plan similar to the ones in Quebec and Eastern Canada, an opposition politician said. With every province east of Ontario regulating the price of gasoline, it's time Ontario did the same, New Democrat Gilles Bisson said as he kicked off his second annual "Pump Shock" bus tour of the province.
"Things are so bad customers can't trust whether or not the price they're paying at the pump is fair," said Bisson. "What motorists need is help. They want the kind of gas price stability and predictability that only the province can offer."
Bisson urged Ontario's Liberal government to create a review board which would freeze gasoline prices for two weeks, taking into consideration market conditions, the cost of transporting the fuel and fairness to consumers. He said other jurisdictions where similar regulations are in place, such as PEI, have seen an end to wild fluctuations.
The Ministry of Energy refused Monday to entertain introducing such a scheme, saying regulated gasoline prices would only discourage competition and lead to higher prices.
The government's position is supported by research data, said industry analyst Cathy Hay. "Over the longer term our data would suggest there's no consumer benefit in terms of lower prices," said Hay, of M.J. Ervin & Associates. She said the only benefit to regulation is less volatility through stable pricing. "If retailers have the opportunity to compete in a nonregulated environment, it's our contention that that will benefit consumers more than a regulated environment," she said.
Still, some independent station owners said the current marketplace in Ontario has zero competition anyway because the major oil companies control all the petroleum.
Tajdin Esmail said he closed down his gas station in Toronto's east end because he couldn't compete with the majors, who both distribute gasoline and own their own retail stores. "You buy it from them, and then they turn around and undercut you and sell it at a price a lot cheaper than what you are buying the product for," he said. "It just doesn't make sense."Members help make our journalism possible. Become a CSP member today and unlock exclusive benefits, including unlimited access to all of our content. Sign up here.