[quote]Report backs up claims of gas price-gouging
By Leanne Ritchie
The Daily News
Friday, September 30, 2005
The recent spike in gas prices constitutes nothing short of price-gouging on the part of the oil industry, according to a recent report. And that includes the summer price increase in Prince Rupert that left motorists forking over more than twice what they should have if the increase at the pumps was based on crude oil prices alone.
According to an analysis by economist Hugh Mackenzie, released earlier this week by the Canadian Centre for Policy Alternatives, the Canadian oil industry has been taking advantage of public fear prompted by the devastating hurricanes in the U.S. and charging more than what was justified by the increase in raw material costs…
Yeah, we’ve pretty much figured that out.
From the quoted report:
[quote]A 7.9-cent increase would have matched the crude oil
price increase. The 15-cent increase weâ€™re now paying
is profiteering. And the 40-cent increase we were
paying over the Labour Day weekend was just plain
In fact, Canadians already know what $100 a barrel oil
is like â€” we were paying a price equivalent to $110 a
barrel oil on the Labour Day weekend.
What should the price be? What would it be if we
werenâ€™t being gouged by the oil industry? Letâ€™s figure
it out. Crude oil at $68 (U.S.) a barrel translates to 50
cents per litre (Cdn) at the pump. Normal refining and
marketing margins add 14 cents per litre. Provincial
taxes (Ontario) add 14.7 cents. The federal gasoline
tax adds 10 cents per litre, for a total of 88.7 cents per
litre. Add 6.3 cents for the GST, and that gives us 95
cents â€” which is what we should be paying.
And for that period around Labour Day, when the
difference between the price and what would have
been justified by crude oil prices was much greater â€” as
much as 45 cents per litre at the peak â€” the industry
was knocking down excess profits at a cool $49.5
million a day. Not a bad payoff from exploiting fear.
Now, to be fair to the industry, it doesnâ€™t gouge us
all the time. Indeed, there is normally a pretty stable
relationship between crude oil prices and prices at the
pump. The chart below makes the point. It shows the
portion of the price of gasoline in Ontario in cents per
litre that could not be explained by crude costs, normal
refining and marketing margins, and taxes, from
January 2005 to mid-September.
The consistency of the pattern over the past nine
months makes the profit grab in August and
September all the more obvious.[/quote]