News

Soaring gas prices are hurting Canadian small businesses, the head of the Canadian Federation of Independent Business said in an open letter to the Prime Minister Paul Martin on Tuesday.

CFIB President and CEO Catherine Swift demanded the federal government launch an investigation into the practices of Canada's gas refining industry and for gas tax relief to combat the impact soaring gas prices are having on small business.

"Soaring gas prices are having a major negative impact on the Canadian economy," said Ms. Swift, in a press release.

According to Ms. Swift, the profit margin at Canadian refineries is currently at an all-time high, sitting at about 30 cents a litres. This compared to historical returns of about 5-10 cents, she said.

She said the Competition Bureau has the power to monitor the industry in search for evidence of price fixing or price gouging.

The CFIB also called for a review of how federal and provincial tax gasoline. Combined federal-provincial taxes represent between 40 to 50 per cent of the price of gas in Canada, the CFIB asserted.

In comparison, compared to 20 to 30 per cent in the U.S. We believe that the overall level of tax on gas in Canada is too high and should be brought closer to the U.S. rate.

The federation also wants the provinces to place a moratorium on fuel taxes, as some American states have done in the wake of hurricane Katrina.

The CFIB represents 105,000 small- and medium-sized businesses.

Ms. Swift doesn't buy federal arguments that lowering taxes may not benefit consumers.

"I've heard the excuses that both Prime Minister Martin and Finance Minister [Ralph] Goodale have given and they are lame in the extreme," Swift said in an interview from Toronto.

Mr. Goodale has said that lowering taxes might reduce gasoline prices for a day or two, but he was skeptical of a longer-term impact.

While lowering taxes may ease the burden on consumers slightly, dealing with refining capacity and reforming the federal Competition Act are key to better controlling prices at the pump, said Dan McTeague, a Liberal MP who has been fighting for greater competition in the energy sector.

"It needs to be overhauled to be more deferrential to enhancing competition rather than diminishing competition," he said.

"The mergers provisions of the Act promote [industry] intensity and encourage monopolies."

The federation agrees.

"Industry reports show that the profit margin of Canadian refineries is currently at an all-time high," states the letter to Mr. Martin.

"We recommend that the Competition Bureau monitor closely developments in the industry for any evidence of price fixing or price gouging."

In Montreal, Henri Masse, leader of the Quebec Federation of Labour, called for the federal government to put a temporary tax on excessive profits earned by oil companies.

"Let's not wait until the point of no return that's caused unacceptable inflationary pressures after past oil crunches," he said.

A key parliamentary committee will return to Ottawa next week to review soaring gasoline prices.

The industry committee will hold a one-day session on Sept. 22, four days before the House of Commons begins a new session.

The federal competition watchdog has already reviewed gas prices five times in the past 15 years.

There are three major players in Canada's gasoline industry — Shell, Petro Canada and Esso.

"All [of them] have the characteristic symptoms of acting as an oligopoly," said Mr. McTeague, a market condition where there are so few sellers that the actions of any one of them will affect prices and hurt competitors.

"They drive prices up instantaneously without any due regard to market forces."