Mr. E. J. YOUNG (Weyburn):
In moving concurrence in the fourth report of the select standing committee on banking and commerce, I wish first of all to draw the attention of the house to the wording of the reference, which reads:
That, in the opinion of this house, the price of gasoline to the Canadian consumer has for some time past been too high and that this matter should be referred to the select standing committee on banking and commerce to investigate and report.
The question with which the committee had to deal was this: Are we in Canada paying too much for our gasoline, and, if we are, what is the reason? The committee reasoned that if we are paying too much for our gasoline it must be that somebody connected with the refining of gasoline or somebody connected with its distribution-or both -is getting too much for his services.
During the calendar year 1931 we imported 84,000,000 gallons of gasoline on which duty was paid, and during the same year we imported some 32,000,000 gallons on which no duty was paid. Now, all of that 32,000,000 gallons which came in duty free was imported by refiners. In order to prove that statement I would refer the house to section 272 of the customs tariff as amended at the short session in September, 1930. It reads:
Natural casinghead, compression or absorption gasoline, lighter than -6690 specific gravity at 60 degrees temperature, when imported by distillers of petroleum for blending with other gasolines distilled in Canada: British preferential tariff, free; intermediate tariff, free; general tariff, free.
Let me explain what natural casinghead gasoline is: it is gasoline as it comes from the earth. In that state it is not suitable for use in engines; it vaporizes too easily. But it has been found that by mixing it with other gasoline it can be used quite satisfactorily. It is not the raw material of any manufacturing process; it is gasoline, and the only treatment it requires is to pour some other kind of gasoline in with it.
This section 272 provides that refiners of gasoline may import that form of gasoline duty free, but anybody else who is importing it must pay a duty of 2J cents per gallon, plus whatever dumping duties the government sees fit to impose. I should like hon. members to picture to themselves for a moment two distributors of gasoline located on opposite corners of the same street, one of them a branch of a refining company and the
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other an independent distributor. Both these distributors are selling identically the same product, namely, a mixture of Canadian refined gasoline, with casinghead gasoline imported from some other country. The government says to one of these distributors, "You may bring in your gasoline free of duty," and to the other it says, "For the same kind of gasoline you must pay a duty of 2i cents per gallon plus whatever dumping duty we see fit to impose."
I ask you to consider for a moment what the effect of that would be on an independent distributor. How can any independent distributor hope to survive and do business under such conditions when the government allows his competitor to bring in his gasoline duty free while it insists on the independent distributor paying a duty of anywhere from 2J to 5 cents a gallon? Yesterday the announcement appeared in the press that the price of gasoline had dropped 4 cents in New York, and the despatch reported that this was due to the competition of independent distributors. No such thing could happen in Canada because the government here has specifically said to the independent distributors, "We will not allow you to remain in business; at any rate, we will not allow you to bring in your product at the same rate as we allow the refiners to import the very same thing."
I contend, therefore, that I am justified in the statement that all of the 32,000,000 gallons of duty-free gasoline imported last year was imported by the refiners. Some 84,000,000 gallons of dutiable gasoline was brought in, and I presume it was brought in by the independents. That is only about one-eighth of the total consumption, so that seven-eighths of the consumption passes through the hands of the refiners. The committee reasoned, then, that since the refiners held such a large proportion of the market, they must look to that source to investigate whether or not we are paying too much for our gasoline.
The largest refiner in Canada is the Imperial Oil Company. They are such a large factor in the market that whatever they do the others must generally fall in line with, so that the committee decided that if they investigated the Imperial Oil Company first to find out how they were faring, they would have a pretty good idea as to what was happening with the others. They investigated, securing the services of a firm of chartered accountants, competent men who looked into the affairs of the company. I have here a summary of their findings, and I will give it to the house: (a) That the company has not been guilty of any cost-loading; (b) The
company has been honestly and soundly financed; (c) That marketing costs in this country are too high; (d) Variations in price during the last three years are based not on refining costs but on variations in the price of crude oil and on increases in various forms of taxes, freight and exchange; (e) That lower prices of gasoline in the United States and Canada, which appear to arouse the wrath of our people, are due in large measure to tax evasions on the other side of the line; (f) That the zoning basis of establishing prices tends to favour districts remote from refineries rather than those that are close; (g) That in some districts the spread between the wholesale and retail price is entirely in the hands of the retailers; (h) That the average profits of the Imperial Oil Company after paying all refining and marketing costs is 1*01 cents per gallon; and, (i) That no further expense should be incurred in continuing the investigation.
Those are the findings of the committee and they are based on the evidence produced. That was as far as the committee could go in investigating. They found that the companies were not taking excessive profits; they were not dishonestly managed; that variations in prices were due not to variations in the cost of refining but to variations in the cost of crude oil and changes in freight rates, taxes and so forth. But there is one thing which the committee did not and could not investigate, nor could they be expected to investigate it, and that is the question whether the Canadian refineries are efficiently managed, or whether, on the other hand, the oil-refining industry is one that can be profitably carried on in Canada. The committee could not investigate this question because there is no one in Canada who could give evidence in that regard; the only persons in Canada who could give evidence as to the efficiency of the refineries are the refinery men themselves. No person in Canada is capable of informing us whether our refineries are as efficient as the refineries in other countries. The committee, therefore, could not investigate that phase of the situation.
But there is one infallible test which we can apply to determine whether or not our refineries are efficient, and it is this question: Can we buy gasoline cheaper anywhere else? If the refineries of other countries can sell gasoline cheaper to us than we can get it from our own refineries, then one of two things is true: Either they are more efficient than our refineries, or the refining of gasoline is better adapted to other countries than ours. The question is, Can we or can we not buy gasoline
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from somebody else cheaper than from our own refineries? In answer to that question I would refer the house to the evidence of Mr. O. B. Roger, of the Shell Oil Company. It will be found at page 411 of the evidence given before the committee. Mr. Donnelly is questioning Mr. Roger:
Q. You could buy from American concerns, as I have just said, for between 4 and 5 cents, and yet you are paying 6?-A. Yes; but then we would have been subject to dumping duty. The regulations provide that gasoline must be imported at the price in the bulletin.
Q. Instead of giving it to the government you give it to the American companies?-A. Yes.
What does that mean? It means that under the amendment to the Customs Act passed by this house in September, 1930, the government has power to fix the value for duty on gasoline. They did so. They fixed a certain value which they informed the importers they must pay for their gasoline, and if they did not pay that price they were subject to dumping duty. The Shell Oil Company was able to buy gasoline at 4 and 5 cents a gallon in the United States. That was lower than the price fixed in the bulletin, and the Customs department said to them, "If you buy at that price in the United States we will make you pay in the form of a dumping duty the difference between that and the bulletin price. But if you see fit to pay the extra price in the United States to the refiners over there you will be exempt from the dumping duty. We don't care whom you pay the extra price to, but we insist upon your paying it." Could further evidence be required that we are paying for our gasoline more than is necessary when the customs officials deliberately say to importers, "You must pay more and we don't care whether you pay it into the revenue or to the American manufacturer, but we insist on your paying it." The Shell Oil Company had to add that to the price they charged for their gasoline. Referring to page 413 of the evidence, I find the hon. member for Swift Current (Mr. Bothwell) examining Mr. Roger in connection with gasoline coming from the Dutch West Indies, as follows:
Q. What would your freight be on that from the Dutch West Indies to Montreal?-A. I should say nearly one cent a gallon, perhaps a fraction under a cent, but approximately a cent. I should say the freight, as far as my memory serves me, fluctuated somewhere in 1931 around 29 cents a barrel.
Q. At this price, that would bring it up to about 6-40 cents an Imperial gallon?-A. Excluding duty and sales tax.
Here again we have evidence that the same company could bring gasoline from the Dutch West Indies and lay it down in Montreal at 6-40 cents per gallon if it were not for the
duty. No further evidence should be required to prove that we are paying too much for our gasoline. If further evidence is required, I refer the house to the statement made by the Minister of National Revenue (Mr. Rvck-man) when his estimates were going through to the effect that certain men from Montreal had come to him and stated that they wanted to bring gasoline in from Roumania. What answer did he give? He said: If this gasoline is being dumped, you cannot bring it in. What did he mean by dumping? Under the new definition of dumping as set out in 1930 by the minister, it means the selling in Canada of gasoline or of anything else at a price lower than that at which our own manufacturers are willing to sell for. Time and time again the government has deliberately insisted that the people of this country pay more for their gasoline than they want to pay.
I want to say a few words in defence of Imperial Oil Limited. This company has been criticized quite severely, and in my opinion unjustly for their action in curtailing production in the Turner valley oil field. The market in western Canada for gasoline has fallen off considerably during the last year or two and Imperial Oil Limited found it necessary to reduce its purchases in the valley by about half. For that they were very severely criticized; people said that they should use Canadian produced gasoline, that it should be shipped down to eastern Canada instead of importing similar gasoline from the United States. The company put out an explanation in its own defence. This was to be found in most of the filling stations in western Canada and I shall read in part from a copy I secured. It reads:
The cost of the Turner valley product, plus freight rates, are such that the product cannot compete with other gasolines except within a freight radius of Calgary. Turner valley gasolines laid down at the Sarnia refinery of Imperial oil, within reach of a large consuming market, would cost on the present basis of prices and freights $5.97 per barrel. Casinghead gasoline which is equivalent to the product of Turner valley, on the basis of prices existing in the mid-continent field and of established freight rates would cost $3.62 per barrel. It is obvious, therefore, that the amount of naphtha drawn from the Turner valley must depend entirely upon the consumption of gasoline within that area of the western provinces where favourable freight rates prevail.
I think that is a very fair and just statement of the case. The company states quite clearly that if they were to use Turner valley gasoline and ship it to the parts of Canada where there are markets for it, it would cost them $2.35 a barrel more than the United States product. Very properly they take the stand that they could not incur that extra
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cost and add it to the burden borne by the consumer in this country. I say that that is a very fair and proper attitude for that company to take. But I ask this question of the Prime Minister (Mr. Bennett) and I want an answer: If it is right, if it is fair, if it is in the public interest that Imperial Oil Limited should be allowed to buy its supplies where they can be bought the cheapest, why is it not right for the common people of this country to do the same thing? That is the question to which I should like an answer. I think I have proved that the price of gasoline in this country is too high and the cause of this high price is the duties and dumping duties imposed by the present government. The additional cost which we are paying is not going into the treasury, in many cases it is being paid to foreign manufacturers.
Mr. Speaker, I beg to move that the report be concurred in.
Moore (Ohateauguay-Huntingdon), Morand,
(Simcoe North), Simpson
(Algoma West), Spankie,
Stewart (Leeds), Stewart (Lethbridge), Stirling,
Stitt (Selkirk), Sutherland,
(Simcoe East), Thompson (Lanark), Totzke,
Weir (Melfort), White (London), White (MountRoyal), Willis,
Mr. R. TV. GRAY (West Lambton): Mr. Speaker, I move that the house do now proceed to the orders of the day.
Mr. \OUNG: Mr. Speaker, that motion is out of order; there is a motion before the chair.