November 7, 1941

LIB

Clarence Decatur Howe (Minister of Munitions and Supply)

Liberal

Mr. HOWE:

Mr. Chairman, I am very glad to place before the committee a rather complete statement of the oil situation. I feel that the situation has been misunderstood; the cooperation extended to the department when we asked for the conservation of oil was very willingly given, but the statement made by the Joy Oil company has shaken the confidence of the people. Therefore I feel it is only fair, both to those who have been cooperating and to those who have not, to state the position as a matter of record. Accordingly I will give the oil position in Canada, with statistics which we have regarded as confidential but which I have ascertained can be placed on record here.

As nearly as we can anticipate war demands upon us, there appears to be no doubt that our requirements for crude oil and finished products without conservation in the coming year will be at least 64,000,000 barrels, an increase of approximately 10,000,000 barrels over the year 1940. This total requirement must be provided for in the following refinery areas:

Barrels

Maritimes 10,500,000

Quebec 16,000,000

Ontario 20,500,000

Prairies 9,500,000

British Columbia 7,500,000

Total 64,000,000

It is difficult to estimate at this time what the Canadian production will be over the coming twelve months, but it is doubtful if it will exceed in volume that of the year 1941, namely, 9,500,000 barrels. Thus 54,500,000 barrels must be brought in from the outside. Having regard to our tanker position and the importance of getting along with the minimum of ocean tanker tonnage, the pipeline into Sarnia and tankers on the inland waterway must be operated to capacity. The plan proposed is as follows:

Barrels

Import via the Sarnia pipeline.. 10,700,000

Import by lake tanker 13,800,000

Import by ocean tanker 30,000,000

Imports by the Sarnia pipeline amount to the full capacity of that line, while imports

The War-Oil Situation

by lake tanker come from other points on the great lakes which are supplied by pipeline, such as Buffalo, Toledo, and one or two other points.

Having regard to the geographical locations of refineries in relation to available sources of supply, there appears to be no alternative plan but the following:

Refining area Canadian production Barrels Via pipeline (Sarnia) Barrels Via lake tankers Barrels Via ocean tankers (including via Portland-Montreal pipeline) Barrels 10,500,000 12,000,000 Total Barrels 10.500.000 16,000,000 20.500.000 9.500.000 7.500.000

4,000,000 9,800,000

10,700,000

9,500,000

7,500,000

Total

9,500,000 10,700,000 13,800,000 30,000,000 64,000,000Percentage

14-8 16-7 21-5 47 100

The Sarnia pipeline is the only pipeline feeding Canadian refineries direct from United States crude-producing areas, namely the midcontinent and Illinois fields. This pipeline operating to capacity is capable of handling the 10,700,000 barrels hereinbefore referred to. This pipeline serves the Sarnia refinery only, yet it has not sufficient capacity to take care of the entire needs of this refinery. The remaining requirements of the Sarnia refinery, as well as the requirements of the other refineries in Ontario total 9,800,000 barrels, which must be brought in by lake tankers. In addition to this movement of crude, it is planned to move 4,000,000 barrels of crude

from Toledo to Montreal by lake tankers, to save ocean tanker movement. Thus we shall have a total contemplated movement of crude by lake tanker to the extent of 13,800,000 barrels.

With regard to the question of lake tankers, it must not be overlooked that these same vessels back-haul to various marine terminals over 20,000,000 barrels of finished petroleum products. In order to bring in the 30,000,000 barrels to the refinery areas where this product is needed, we will require the equivalent of 16'8 ocean tankers with a capacity of

100,000 barrels each. The ocean tanker capacity required for this movement is as follows:

Tanker No. of Tankers Crude capacity 100,000 bbls.

required required each

Bbls. Bbls.

Halifax

10,500,000 680,000 6-8Montreal refineries

12,000,000 750,000 7'5British Columbia

7,500,000 250,000 2-5Total

30,000,000 1,680,000 16-8

We have available to-day eight Canadian-flag and six Norwegian-flag Canadian chartered ocean tankers having an average capacity of approximately 95,000 barrels each, or the equivalent of 13-3 vessels of 100,000 barrel capacity each. Therefore, the total ocean tanker capacity at present under Canadian control amounts to 1,330,000 barrels. Assuming that we shall be able to hold all these vessels, particularly the Norwegian, and experience no sinkings, we are short ocean tanker capacity of 350,000 barrels, or 3-5 vessels of 100,000 barrel capacity each.

As before stated, it is planned to move

4,000,000 barrels of crude from Toledo to Montreal by lake tanker in order to relieve the pressure on ocean tankers. In order to do this we will require 10-2 additional lake

tankers of 21,000 barrel capacity each over and above the lake tankers owned or controlled in the Canadian service. It is possible that by an exchange of products the refiners may be able to reduce the requirements of 10-2 lake tankers to 7-2 lake tankers. If the American flag lake tanker tonnage now on the great lakes and available to Canadian companies in the past remains available in the future, it may be possible to overcome this lake tanker tonnage by chartering American vessels. The fact, however, remains that we are short 3-5 ocean vessels having a capacity of 100,000 barrels each, and at least 7-2 lake tankers over and above those owned or at present controlled in the Canadian service in order to bring in the 43,800,000 barrels which must be provided by ocean or lake transportation.

The War-Oil Situation

It must also be borne in mind that six of the Canadian chartered tankers are Norwegian flag. By arrangement between the sovereign government of Norway and the government of Great Britain, all Norwegian tanker tonnage is earmarked for the battle zone. Two Norwegian tankers which were in the Canadian service earlier this year were taken at the time Norwegian tanker tonnage was turned over by the United States government. Should sinkings again become excessive and/or should Britain require additional tanker tonnage over that which she now has, there is every likelihood that these six Norwegian tankers would be taken. In any event there is no certainty that they can be held in the Canadian trade for the duration of the war.

It must be noted that the refinery operations and supplies required at Halifax are almost entirely war effort. The refinery at Halifax is being operated to capacity on a heavy crude in order to produce the maximum yield of heavy oil. Strange as it may seem, gasoline is a by-product. Although operating this refinery to capacity, it will be necessary to bring in at least 800,000 barrels of diesel oil as such to meet our war demands.

It must also not be overlooked that a substantial part of our requirements on the Pacific coast are also war effort. The storage on the Pacific coast must at all times be filled to capacity, and as the fuel oil is drawn from the storage it must be replaced without delay. In addition to the requirements on the Pacific coast for war effort, our railways must have at least 2,6t)0,000 barrels of fuel oil in order to provide the service expected of them.

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NAT

Richard Burpee Hanson (Leader of the Official Opposition)

National Government

Mr. HANSON (York-Sunbury):

Will the building of the pipeline from Portland to Montreal change the position? Perhaps the minister intended to deal with this later.

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LIB

Clarence Decatur Howe (Minister of Munitions and Supply)

Liberal

Mr. HOWE:

Yes, it does affect the position in that its use will cut down the required number of tankers. I believe it saves about two tankers by shortening the distance from the source of the crude to the end of the pipeline. Of course, without this pipeline we would be in a most serious position indeed.

The following table gives Canada's inventory position as of October 1, 1941, as compared with October 1, 1940; following also is Canada's inventory position as at July 1, 1941, as compared with July 1, 1940, in barrels:

INVENTORY DIFFERENCES Between October 1st, 1940 and October 1st, 1941

Refinery inventories- Maritimes Quebec Ontario B.C. TotalCrude oil

265,262 588,927 476,404* * 58,138 435,923Unfinished products

460* 246,662 27,843 130,731* 143,314Aviation gasoline

53,487* 57,896* 58,498* 4,335* 174,216*Other gasoline

21,265 104,416 533,076 50,128* 608,629Light fuel

21,661* 102,720* 129,217 55,231 60,067Heavy fuel

33,172* 112,419 44,875 224,882 349,004177,747 891,808 200,109 153,057 1,422,721

Marketing inventories-

All gasoline

88,853 6,000* 348,164* 18,422 246,889*Light fuel

15,002* 1,865* 22,771* 2,145* 41,783*Heavy fuel

28,646* 18,461 84,636* 33,467* 128,288*Total deficiencies

222,952 902,404 255,462* 135,867 1,005,761

* Indicates increase in inventory; other figures are decreases.

INVENTORY DIFFERENCES Between July 1st, 1940, and July 1st, 1941

Refinery inventories- Maritimes Quebec Ontario B.C. TotalCrude oil

416 189,084 473,041* 98,838* 382,379*Unfinished products

13,832* 47,642 78,931 31,761* 80,980Aviation gasoline

80,878* 25,089* 22,163* 904* 129,034*Other gasoline

49,533 238,614 608,571 46,267* 850,451Light fuel

48,504* 84,828 34,653 18,536 89,513Heavy fuel

10,714* 176,431 73,824* 271,025 362,918103,979* 711,510 153,127 111,791 872,449

Marketing inventories-

All gasoline

56,000 30,000 456,241* 20,000* 390,241*Light fuel

15,567* 24,444* 85,456* 20,785 104,682*Heavy fuel

7,981* 23,219* 59,679 91,619* 63,140*Total deficiencies

71,527* 693,847 328,891* 20,957 314,386* Indicates increase in inventory; other figures are decreases. 14873-264 revised edition

The War-Oil Situation

One of the net results is that we are over in aviation gasoline. For obvious reasons we are using aviation gasoline at a much greater rate than ever before and we must have stocks in excess of stocks carried in previous years. For the period October 1, 1941, as compared with October 1, 1940, the refinery inventories

Maritimes

Quebec

Ontario

British Columbia

* Indicates decrease.

It is interesting to note that refinery inventories in the maritimes, Quebec, Ontario and British Columbia as of October 1, 1941, are 1,422,721 barrels less than they were on October 1, 1940, and that total refinery and marketing inventories in the same areas are 1,005,761 barrels less than they were on October 1, 1940, notwithstanding the fact that refineries in the three months ending October 1, 1941, received 1,129,688 barrels more than they received during the same three months of 1940.

While the shortage of supplies is more pronounced in the Quebec area-in fact in comparison the inventories are down 902,404 barrels-the fact remains that the Portland-Montreal pipeline will be in operation within a few days. While this pipeline will not be operating to capacity until next spring there should be no doubt about our being able to take care of the needed demands with the assistance of supplies from Ontario refineries.

I should like to go back for a moment to Canadian production. The production of crude petroleum in Alberta in the year 1940 amounted to approximately 8,700,000 barrels. This production fell substantially short of the consumption in the prairie provinces, and necessitated importations as follows:

Barrels

Crude oil, as such imported from the

United States 682,707

White products, as such, imported

from the United States 198,520

White products, brought up the lakes by lake tanker in the summer time and stored at the head of the lakes (refined in eastern Canada from imported crude) 842,622

In other words, the production in the west fell short of supplying the consumption to the end that refiners in the west imported 682,707 barrels of crude as such, and marketers and wholesalers imported in addition 1,041,142 barrels of white products.

The comsumption hereinbefore referred to relates to the provinces of Alberta, Saskatchewan and Manitoba, the western edge of the province of Ontario and the eastern fringe

are down 1,422,721 barrels and for the period July 1, 1941, as compared with July 1, 1940, we are down 872,449 barrels. There was a great drop in inventory after July 1. During the months of July, August and September, there were the following imports by Canadian refineries, exclusive of the prairies, in barrels:

Crude receipts, July, August, September

1940 1941 Increase1,651,374 1,930,055 278,6816,087,135 6,266,093 178,9584,895,970 5,756,710 860,7401,574,495 1,385,804 *188,69114,208,974 15,338,662 1,129,688

of the province of Bristish Columbia, all of which territory is within the economic orbit of Alberta production.

In October, 1940, all refineries in the west were required to make their nominations for the coming year in advance, that is, from 1st November, 1940, until 31st October, 1941. Further, the refineries were requested to build storage at their plants in order to take care of their requirements on a week to week basis. This they did. Further the producers responded to the call for new wells. Fortunately we had a healthy drilling programme. Fortunately we got some good wells. On 30th September, 1941, we had 167 producing wells. On September 30, 1940, we had 126. In the yearly period referred to, forty-one new wells were brought in, and since that time there have been one or two more. In the period January 1 to September 30, 1941, production in Turner Valley field, as the result of new wells and the day to day regular operation, shows an increase of 20-7 per cent over the same period of last year. From January 1 to September 30, 1940, the production amounted to

5,869,648 barrels, and from January to September, 1941-the same relative period-it amounted to 7,084,910 barrels. In the 1940 period, production averaged 21,422 barrels per day, and in the 1941 period it averaged 25,952 barrels per day. It would appear that we are assured a total production of 9,500,000 barrels this calendar year.

This year there have been importations of gasoline from the United States in the same manner as before. Substantial quantities of refined products have been sent up the lakes for distribution in Manitoba and further west. Having regard, however, to the increased production of crude, practically no crude imports have been in evidence this year.

We have had the largest exploratory programme this year in the history of the west. Many structures have been seismographed. There is no question that drilling in new areas will be in evidence next year. There is no doubt also that further new areas will be explored.

- i 3

The War-Oil Situation

We must bear in mind that an oil well is a depleting asset and that we must have new wells and we must find a new Turner Valley. Every effort has been put forward to find this new field.

Many do not realize the extent to which the war effort makes demands upon petroleum supplies.

It is estimated, in any event, the oil controller has been asked to cause refiners to provide for war uses at least 110,000,000 gallons of aviation gasoline over the next twelve months, more than one-tenth of our normal consumption of gasoline. The possibility of obtaining this aviation gasoline outside of Canada has been carefully surveyed and studied. Having regard to the demands on the United States by all countries at war, and the possibility of our not being able to obtain aviation gasoline in the event of any change in war conditions or a further crisis, it is absolutely necessary that we provide for our own aviation gasoline requirements. In

order to do this we first must take a cut for this purpose out of the crude that we refine. While we have not as yet taken a cut out of all of the crude produced in the west, it is quite likely that we will have to do so before a great while. After we take a cut for aviation gasoline, we then must provide for heavy and light fuel oil, our next if not equally important war demand. A careful estimate of the present market for fuel oil has been made. A survey has also been made as to ways and means to meet this demand. As you are aware, our industrial war effort, to say nothing about our requirements on the two coasts, depends upon an ample supply, particularly of heavy oil. When the market demand and the available supply is balanced, there is no surplus.

I shall now place on Hansard, if I may, the petroleum inventories of the various refining districts for different periods, showing the shortages that have been built up over the last several months, in barrels:

PETROLEUM INVENTORIES July 1st, 1940 and 1941

1940 Maritime

Crude oil 467,456

Unfinished 78,950

Aviation 7190

Other gas 332^409

Light fuel 121,126

Heavy fuel 278,251

Marketing 1,285,382

Gas 436,000

Light fuel 86,138

Heavy fuel 59,300

1,866,820

1941 '-

Crude oil 467,040

Unfinished 92,782

Aviation 88,068

Other gas 282,876

Light fuel 169,630

Heavy fuel 288,965

Marketing 1,389,361

Gas 380,000

Light fuel 101,705

Heavy fuel 67,281

1,938,347

Short

Crude oil 416

Unfinished -13,832

Aviation -80,878

Other gas 49.533

Light fuel -48,504

Heavy fuel -10,714

Marketing 103,979

Gas 56,000

Light fuel -15,567

Heavy fuel -7,981

14873-2641 -71,527

Quebec Ontario B.C. Total1,638,051 1,097,364 283,417 3,486,288593,705 672,688 188,323 1,533,666119,442 30,693 2,908 160,233926,987 1,293,646 184,545 2,737,587315,019 307.315 96,759 840,219582,577 192,171 359,869 1,412,8684,175,781 3,593,877 1,115,821 10,170,861601,000 85.845 1,200,000 159,000 2,481,845141,736 43,616 306.679 157,131 735,300218,032 233,655 364,722 875,7095,136,549 5,463,672 1,796,674 14,263,7151,448,967 1,570,405 382,255 3,868,667546,063 593,757 220,084 1,452,686144,531 52,856 3,812 289,267688,373 685.075 230,812 1,887,136230,191 272,662 78,223 750,706406,146 265,995 88,844 1,049,9503,464,271 3,440,750 1,004,030 9,298,412571,000 280,086 1,462,0001 179,000 2,872,086166,180 29.917 405A34J 136,346 839,982241,251 173,976 456,341 938,8494,442,702 5,792,563 1,775,717 13,949,329189,084 -473,041 -98,838 -382,37947,642 78,931 -31,761 80,980-25.089 -22,163 -904 -129,034238,614 608,571 -46.267 850,45184,828 34,653 18,536 89,513176,431 -73,824 271,025 362,918711,510 153.127 111,791 872,44930,000 -456,241 -20,000 -390,241-24,444 -85,456 20,785 -104,682-23,219 59,679 -91,619 -63,140693,847 -328, S91 20,957 314,386

41S8

The War-Oil Situation

Crude oil.. Unfinished. Aviation. . Other gas. Light fuel.. Heavy fuel

Marketing

Gas

Light fuel.

Heavy fuel

Crude oil.. Unfinished. Aviation. . Other gas.. Light fuel. Heavy fuel

Marketing

Gasoline. . .

Light fuel.

Heavy fuel

Short

Crude oil . Unfinished. Aviation. . Other gas.. Light fuel. Heavy fuel

Marketing

Gas

Light fuel. Heavy fuel

PETROLEUM INVENTORIES October 1, 1940 and 1941

Maritimes 512,481 118,655 7,282 165,528 95,233 283,607 Quebec 2,622,209 844,470 145,532 788,357 440,490 651,568 Ontario 1,231,887 657,861 45,435 1,101,483 485.517 349,246 B.C. 310,176 117,375 1,935 131,021 142,281 394,937 Total 4,696,753 1,718,361 200,184 2,186,389 1,163,521 1,679,3581,182,786 5,492,626 3,871,429 1,097,725 11,644,566420,853 451,000 1,418,0001 174,024 166,482 2,630,359100,998 287,490 555,731 16,972 159,850 1,121,04162,623 335,562 323,605 299,698 1,021,4881,767,260 6,566,678 6,359,761 1,723,755 16,417,454247,219 2,033,282 1,708,291 252,038 4,240,830119,115 597,808 630,018 248,106 1,595,04760,769 203,428 103,933 6,270 374,400144,263 683,941 568,407 181,149 1,577,760116,894 543,210 356,300 87,050 1,103,454316,779 539,149 304,371 170,055 1,330,3541,005,039 4,600,818 3,671,320 944,668 10,221,845332,000 457,000 1,595,0001 345,188 148,060 2,877,248116,000 289,355 560,644 34,830 161,995 1,162,82491,269 317,101 408,241 333,165 1,149,7761,544,308 5,664,274 6,615,223 1,587,888 15,411,693265,262 588,927 -476,404 58.138 435,923-460 246,662 27,843 -130,731 143,314-53,487 -57.896 -58,498 -4,335 -174,21621,265 104,410 533,076 -50,128 608,629-21,661 -102,720 129,217 55,231 60,067-33,172 112,419 44,875 224,882 349,004177,747 891,808 200,109 153,057 1,422,72188,853 -6,000 -348.164 18,422 -246,889-15,002 -1,865 -22,771 -2,145 -41,783-28,646 18,461 84,636 -33,467 -128,288222,952 902,404 -255,462 135,867 1,005,761

I now come to the advertisement of the Joy Oil company.

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NAT

Richard Burpee Hanson (Leader of the Official Opposition)

National Government

Mr. HANSON (York-Sunbury):

I was

not able to follow all the figures, but has the minister adequately shown that the position contemplated will be taken care of? Will he give us that assurance, or can he? Maybe he cannot.

Topic:   THE WAR
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LIB

Clarence Decatur Howe (Minister of Munitions and Supply)

Liberal

Mr. HOWE:

As I go on with this explanation I shall show the recent developments. We were very much concerned about it in the spring. We did not know how far the demands of Britain would go. We were told the situation and asked for a certain tonnage. We suggested we could obtain replacements in the United States, but since the crisis

developed, I think last June, we have not as a matter of fact received a single tanker load of gasoline or oil products of any kind in United States bottoms. Should we be allowed to keep our present tanker space, in British and Norwegian bottoms, we would have to consider how we should get along, but we believe that with Britain's present situation and the return of certain tankers to the United States we are reasonably assured of fairly adequate supplies for the winter.

Topic:   THE WAR
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NAT

Richard Burpee Hanson (Leader of the Official Opposition)

National Government

Mr. HANSON (York-Sunbury):

That

answers my question.

Topic:   THE WAR
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LIB

Clarence Decatur Howe (Minister of Munitions and Supply)

Liberal

Mr. HOWE:

However, as I say, considering the heavy war commitments, particularly of the navy, the mercantile marine and the air

The War-Oil Situation

training schools, we must retain sufficient grip on the consumption of gasoline to enable us if shortages develop to make up these shortages from gasoline for pleasure driving and other non-essential uses, rather than have the war effort crippled.

I will now discuss the advertisement of the Joy Oil company, which I am sure everyone has read. It is regrettable that in times like the present, when it is so essential that all effort and thought be directed towards the winning of this war, those engaged in this work must find it necessary to lay aside their tasks to answer gross and calculated misstatements made to the public.

Perhaps I should first answer the question of the leader of the opposition as to what the Joy Oil company is. It is a company owned in the United States, the only officer of the company I have met, Mr. Austin, who signed the open letter in the form of an advertisement, being also a resident and citizen of the United States. The company distributes gasoline in only three areas in Canada

the Montreal area, the Toronto area, and the Sarnia area. Its total imports represent about one-tenth of one per cent of the total petroleum products brought into this country.

The Joy Oil company has no assets in this country except distributing stations and storage tanks. It has no refining equipment. It owns no tankers. It has no facilities other than those for distribution. It has been operating through the past several years by buying gasoline in any part of the world in which it can be bought, renting tanker space to bring it to Montreal, and distributing gasoline from there. In the past several years, of course, gasoline was a drug on the market, particularly in north America, and it was easy to buy gasoline as such, I dare say even at bargain rates, and very easy to rent tankers because there was then a surplus of tankers, and charter rates were low. The result was that the Joy Oil company was able to bring in gasoline and to undersell Canadian refiners who had a heavy investment in refining capacity and reliable sources of supply.

Topic:   THE WAR
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NAT

John Ritchie MacNicol

National Government

Mr. MacNICOL:

Except for the Turner

Valley their supply sources were outside of Canada?

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LIB
NAT
LIB

Clarence Decatur Howe (Minister of Munitions and Supply)

Liberal

Mr. HOWE:

The Canadian refiners have

had facilities for bringing in gasoline from wells controlled by Canadians or from other sources of supply that were reliable. They had facilities for bringing in oil for refining by themselves.

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NAT

John Ritchie MacNicol

National Government

Mr. MacNICOL:

I beg the minister's

pardon. Perhaps I misunderstood him. He was speaking about importations, and I interjected to ask him if the supply, for the most part, did not come from outside Canada; that is, apart from Turner Valley.

Topic:   THE WAR
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LIB

Clarence Decatur Howe (Minister of Munitions and Supply)

Liberal

Mr. HOWE:

Yes,-entirely. It comes in as crude and is broken down into all the components we use. From the crude we get fuel oil, gasoline, heavy lubricating oils, and all the various components of crude oil, as Canadian products.

In the Joy Oil open letter to the Prime Minister of Canada, as published in the form of an advertisement in certain Toronto newspapers, an attempt is evidently being made to create the impression that Canada at no time faced a shortage in petroleum products, that the shortage in ocean tank tonnage was not real, and that it was simply a scheme of major oil companies to gain their own ends. Nothing is farther from the truth.

The President of the United States, directly and indirectly through various government bodies, ordered the oil companies owning and operating tankers under charter to deliver tankers to Britain under the lease-lend arrangements. The oil companies of the United States had no alternative, and they had nothing to do with it, other than to comply with the demands which were made upon them. I have before me a copy of a memorandum in regard to a meeting held in Washington on May 14, between Sir Arthur Salter, head of the British shipping mission in the United States, and representatives of the United States maritime commission, and Mr. Wilgress of the Department of Trade and Commerce and Mr. A. L. M. MacCallum of the Canadian shipping board, at which time the supply of tankers to Britain from the Canadian service was discussed. I have also before me a memorandum setting forth Britain's petroleum supply position and tanker position, which was left with me by Sir Arthur Salter just about the first of July. This memorandum sets forth in detail, with supporting documents, Britain's petroleum stocks, tanker losses and urgent needs. I have also in my hand a copy of a letter written by Sir Arthur Salter to the oil controller for Canada dated July 2, 1941, in which Sir Arthur on behalf of Britain requested the following:

1. The immediate release for United Kingdom service of eight Norwegian tankers then chartered to Canadian oil companies.

2. The release of eight Canadian flag ocean-going tankers for service as soon as the St. Lawrence was closed to navigation.

The War-Oil Situation

These sixteen tankers, I may say, were all of the tankers owned or then under charter by Canadian companies.

3. The release to Britain of as many lake tankers as possible, said lake tankers to be used in the coastal service around Great Britain with a view to relieving ocean tanker tonnage which at the time was being employed in this coastal service.

In other words the urgent request which came at that time was for all of the tankers that Canada owned or had chartered, with a number of tankers that had never been previously operated other than on the great lakes. In fact it was suggested that arrangements might be made immediately to replace the eight Canadian-flag boats with United States-flag boats which were then in the shuttle service under the first arrangement made with the United States by Britain for the supply of tankers. We were asked immediately to change our boats for United States-flag tankers and to send all our fleet to Britain.

Following delivery of this memorandum of the facts by Sir Arthur Salter, and realizing the seriousness of the situation as far as Britain's supply of petroleum products was concerned, I immediately conferred with the oil controller, and it was decided to direct the companies having Norwegian tankers under charter to turn them over to Britain without delay. It was further agreed with Sir Arthur Salter that the eight Canadian-flag tankers could go into the United Kingdom service as soon as navigation in the St. Lawrence closed, provided of course that we would receive in return equal replacement tonnage out of the shuttle service.

As I have before stated, these sixteen tankers were all that were owned or controlled by Canadian importers. Nevertheless we figured that we could depend on replacements out of the shuttle service for our war needs.

To make the statement, therefore, or even cast the reflection that this tanker situation was the instrument of anyone other than the urgency of Britain, is an entire misrepresentation of the facts, is misleading, and damaging to our war effort.

Further, in the advertisement reference is made to the ocean and lake tanker tonnage available, that is, the Canadian-flag ocean tankers in the Canadian trade and the Canadian tanker tonnage available for ocean service. Associated with that statement is one setting out Canada's requirements, following which there is a definite statement that there is an excess of ocean tanker space over and above the requirements.

While an order in council was passed prohibiting the advertising by anyone of ships in the Canadian service, the Joy Oil company proceeds to give the information in a public statement. Neither the statement as to Canadian-flag ocean tankers nor the one in regard to small Canadian-flag lake tankers is correct. In the first place, the ocean tanker Canadalite is listed as available ocean tanker tonnage. This ship was lost in the battle zone in March of this year. Further than this, the advertisement incorrectly places the Tronto-lite. This tanker is listed with the lake tankers and is left out of the ocean figures. Even however, if the Trontolite were included in its proper category there is a discrepancy of 210,592 barrels, or the equivalent of two large ocean-going tankers. In other words, the cargo-carrying capacities of ocean tanker tonnage which remained available to us total 1,336,600 barrels and not 1,547,192 barrels as published. The figures shown in the advertisement indicate the deadweight capacity of each vessel and not the cargo carrying capacity. Fuel, water and ship's stores naturally reduce the deadweight capacity.

As regards the small Canadian-flag lake tankers referred to in the advertisement as available for ocean service, this list is not correct, neither is the tonnage correct. As before stated, it includes the Trontolite; further, however, it leaves out three small lake tankers of an aggregate capacity of approximately 56,000 barrels. The aggregate figures are wrong inasmuch as the Trontolite, which was included, has an aggregate capacity of

73,000 barrels; further, the inclusion of the Britamette as having a capacity of 21,000 barrels, when this ship's capacity is only 2,200 barrels. Regardless, however, as to the total tonnage of lake tankers available to us, it is an accepted fact that the majority of these vessels are not fit for ocean service. WThile they might be used in the Caribbean, there is grave doubt that they could be used in the north Atlantic winter run, as suggested.

Reference is made to ocean tanker requirements at 1,380,000 barrels. What period these requirements refer to is not stated. In the light, however, of the information I have already given, the statement can only be looked upon as intentionally misleading. You will recall that the tanker requirements by ocean tankers was 30,000,000 barrels. I do not know what the allusion to 1,380,000 barrels was intended to refer to.

As I have before stated, there is no excess ocean tanker space. There is a shortage, and that shortage is becoming greater every day, as was also shown in the inventory figures which I have given.

The War-Oil Situation

The letter to the Prime Minister as published states that unless the Joy Oil Company Limited can get its share of tanker space allocated to it by the government, its stations will run out of gasoline and it will be forced either to close down or to buy from the big oil companies and raise its price to the public four to five cents a gallon. It is clear from the figures I have given that there are no tankers to be made available from those in the Canadian service, unless we place the business of the Joy Oil company in three congested areas, selling motor gasoline to the motoring public, ahead of our national requirements. The Joy Oil Company Limited and/or anyone claiming to be associated with it has never been refused a permit to bring gasoline into Canada. It is free to buy gasoline wherever it wishes. If, on the other hand, gasoline is not now available at prices which will enable these companies to retail their gasoline at cheaper prices, that is no fault of ours.

That no doubt i3 a condition arising out of supplies of gasoline in the western hemisphere -in other words, arising out of war conditions.

The oil controller, or anyone associated with him, has at no time objected to the petroleum coordinator or the maritime commission of the United States supplying the Joy Oil company with tanker tonnage, excepting that the oil controller has refused to permit the requirements of the Joy Oil company in the way of tanker tonnage to take precedence over tanker tonnage which was being requested by him to take care of Canada's national war effort. The requests by the oil controller for tanker tonnage to build up reduced inventories have not as yet been satisfied, and in the light of the figures I have given the committee, it would not be otherwise than criminal to give the supply of motor fuel for the Joy Oil company precedence over that which we require in order to carry on our war effort.

Having regard to the gasoline purchased by the Joy Oil company in Trinidad, on the 24th June of this year, the office of the high commissioner for the United Kingdom in Ottawa informed the acting under-secretary of state for external affairs, by letter, that owing to a shortage of tankers it had become necessary to draw all supplies for the United Kingdom from the nearest sources, and sterling oil, which formerly came from Iran et cetera, had to be replaced by supplies from the west. I read the letter as follows:

My Dear Mr. Robertson:

The high commissioner has received a telegram from the secretary of state for dominion affairs on the following subject.

The petroleum department have stated that Trinidad Leaseholds Limited entered^ into negotiations with two Canadian companies, Austin of Joy Oil Company, and Sun Oil Company, to supply them with motor spirit from Trinidad.

Owing to the shortage of tanker tonnage it has become necessary to draw oil supplies for the United Kingdom from the nearest sources, and sterling oil, which formerly came from Iran, et cetera, has had to be replaced by supplies from the west. As a result Trinidad's former surplus of motor spirit has been absorbed and Trinidad Leaseholds Limited are now unable to implement their arrangements with the two Canadian companies.

The high commissioner has been asked to explain their position to the Canadian authorities and to stress that the offer of supplies made by Trinidad Leaseholds Limited was made in good faith, that their inability to implement it has arisen out of circumstances over which they have no control, and that they are in no way to blame for the present difficulty.

Yours sincerely,

W. C. Hankinson

One other Canadian company not negotiating with Trinidad Leaseholds Limited had arranged for their total supply of aviation base stock in Trinidad, aggregating more than eight million gallons. This supply was also cut off by the petroleum department of Great Britain.

Hon. members will therefore see that it was not the oil controller who denied the Joy Oil company the Trinidad gasoline; it was the petroleum board of Great Britain. They will see that the Joy Oil company was not the only company affected by this act. Two others operating in Canada were also affected.

Reference is also made in the advertisement to increased costs to the public and the government. I have been wholly in accord with the controller's policy to bring in our petroleum requirements even at increased costs, using every form of transportation that was available, and also in favour of the increased cost being added to the cost of the product. Had it not been for this policy, the inventory position of Canada, as I have already quoted, would not be as good as it is to-day. I approved the increase of one cent which was put on in July. This increase applied to all Canada, but as far as the prairie provinces are concerned, this increase went back to the producers of Alberta oil. In other words, in order to stimulate production, an increase of 27 cents a barrel was approved to the producers of Turner valley crude. A further increase of one cent as of October 1 last was made with the concurrence of the war-time prices and trade board. This was based on statements supplied by the distributing companies showing their increased costs. These statements were checked up by the oil controller's office.

Reference is also made in the Joy Oil letter to the loss of gasoline tax to the federal government through gasoline rationing. This cut

The War-Oil Situation

applied only to service stations and certainly did not, as suggested by the letter, cover all the gasoline sold in Canada.

Reference is also made to the loss of customs duties through excluding imports. This statement is characteristic of the whole advertisement. It is entirely misleading, because there has been no prohibition of imports that I know of.

While I am on the subject, I should like to say something about the price of gasoline. It has been suggested that every move made by the oil controller has put money into the pockets of the oil companies; that is, by stopping credit cards it was a saving to the oil companies-a fairly large saving. As I have said, there have been two increases, one in July of one cent a gallon and one in October of one cent a gallon. But I would point out that the increase on gasoline at the gulf, where all the gasoline comes from, has been more than two cents-that is, two cents based on the small United States gallon, which is somewhat more when translated into cost, in Canadian money, of the Canadian gallon. The price in New York city, which is a very large retailing centre, both tank wagon price and retail price have been advanced two and a half cents a gallon. We have kept rigid control of gasoline prices since the institution of the office of the oil controller. The refiners have had to contend with a very sharp rise in the price of crude oil, and they have had to contend also with greatly increased transportation costs. Strangely enough, the cost of obtaining oil from pipeline is considerably more than obtaining it by ocean tankers. [DOT]

Topic:   THE WAR
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NAT
LIB

Clarence Decatur Howe (Minister of Munitions and Supply)

Liberal

Mr. HOWE:

Yes; and, of course, tank cars have had to be used to a much greater extent than formerly, which greatly increases the cost of the industry. What has been done has been to calculate carefully the additional cost as against the additional saving that has been made by the methods of the oil controller.

We have a staff of accountants engaged constantly in studying the problem. We have not granted the increases which the figures seemed to demand. We have said that the oil companies must share some of the hardships with the Canadian public, but we have insisted that the oil companies obtain crude oil from every source from which it can be obtained and in the largest volume in which it can be obtained, more or less regardless of cost; and we have tried to adjust the cost over all the users of the product.

'Mr. Howe.]

I do not think anyone can say that the oil controller's office has not been well administered. As I say, increases in cost that have been authorized have been less than those that have prevailed in the large markets to the south of us.

We have asked for the cooperation of the people in cutting down pleasure driving. The effect of that was to cut down the increase that had occurred in 1941 over 1940. Whereas the July, 1941, figu res of consumption were twenty per cent over the figures for July, 1940, the September figures, I am happy to say, were just even with the consumption for September, 1940. That much w'e have done and I think it was a great step in advance. Now, what about the future?

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NAT

Richard Burpee Hanson (Leader of the Official Opposition)

National Government

Mr. HANSON (York-Sunbury):

Before the minister leaves that, apropos of the increase of two cents to the consumer of gasoline, and the minister's previous statement that in some areas of Canada crude for the navy and war requirements and the merchant marine was the main objective, and that gasoline had become a by-product, is he able to assure the committee and the country that, with regard to the two cents a gallon which the public are now paying for gasoline, over what they were paying, and having regard to the factor that crude is in some important centres the main requirement, the Canadian public is not being asked to assume an undue burden? How about the distribution of the increased cost as between gasoline and crude? Is it all being passed on to the Canadian consumer? If the minister had an audit, as he said, it would be some reassurance to the Canadian public that they were not being asked to bear an undue proportion of the increase in the price of gasoline. I do not know anything about it, but I am looking for light and I think the minister should give the public these figures in the form of an auditor's certificate. Has the price of crude to the navy and the merchant marine and the government of Canada, whoever is the purchaser, been kept stationary, or has that had a relative increase also? Only part of the story has been told. I have no attack to make on anyone. I think the minister has answered the charge of the Joy Oil company perhaps fully, but I think the whole story of the increase of two cents in the price of gasoline to the ordinaiy consumer has not yet been told.

Topic:   THE WAR
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LIB

Clarence Decatur Howe (Minister of Munitions and Supply)

Liberal

Mr. HOWE:

Every effort has been made to assess the increase in the cost of crude evenly over the products. Of course the same crude makes the fuel oil and the gasoline.

Topic:   THE WAR
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NAT

Richard Burpee Hanson (Leader of the Official Opposition)

National Government

Mr. HANSON (York-Sunbury):

What has

been the increase on the diesel fuel?

The War-Oil Situation

Topic:   THE WAR
Permalink
LIB

Clarence Decatur Howe (Minister of Munitions and Supply)

Liberal

Mr. HOWE:

There has been an increase;

we are, I suppose, the chief buyers of fuel oil. I am assured by my officers that it is in proportion to the yield of crude oil as against gasoline.

Topic:   THE WAR
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NAT

Richard Burpee Hanson (Leader of the Official Opposition)

National Government

Mr. HANSON (York-Sunbury):

What has been the increase?

Topic:   THE WAR
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November 7, 1941