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V Hearing Highlights and Interim Report Feedback

This chapter provides an overview of the facts and opinions presented at the public hearings and in the feedback received in response to the Interim Report.

A. Overview of Oil Company Presentations at Hearings

The oil companies with refining capacity presented the Committee with a consistent perspective at the hearings, which is that there is no need to consider additional regulation of the gasoline industry. The principal reasons offered in support of this view are that:

  • Gasoline prices excluding taxes, and refining and marketing margins have been on the decline in New Brunswick and across Canada for the past five years.
  • Gasoline, excluding taxes, is approximately 30% less costly today in inflation adjusted terms, than it was in 1980.
  • Gasoline retailing practices are changing rapidly. The traditional two bay and pump island outlet is becoming relatively rare while a growing number of outlets have significant other revenue sources such as a convenience store or restaurant. Gasoline is at least as important to these outlets as a traffic builder, as for its direct profit contribution.
  • New Brunswick has a high number of retail outlets per capita and for the available volume. Accordingly, it has an inherently expensive retail network which accounts for higher prices.
  • The market share of independents has been growing on a national basis as well as in New Brunswick.
  • Jurisdictions with experience in regulation have typically witnessed higher prices for consumers. Nova Scotia was often cited as an example.
  • The New Brunswick market exhibits the characteristics of a competitive market: competing wholesale suppliers, a variety of retail suppliers and brands, price volatility and price diversity.
  • Care must be taken in drawing conclusions from the NRCan data which only includes information from the largest city in each province.

B. Independent Dealer Presentations

The presentations made by the independently owned gasoline dealers operating under the brand of a refiner marketer and the views offered by independent chains such as Wilson or Greg's were consistent. Their principal assertions were that:

  • There is a concerted campaign by the refiner marketers to decrease the number of independently owned retail outlets in the Province. °
  • The means being used by refiner marketers to "squeeze" independent dealers include:
    • - a variety of unexpected new charges or changes in costs for credit, temperature adjusted pricing and communications equipment.
    • - discriminatory pricing to the degree that dealers have paid wholesale prices higher than the retail price at nearby outlets operating under their supplier's brand.
  • Independent dealers are important to consumers as they encourage a price competitive market.
  • The independents that operate with low cost structures and that pass these efficiencies on to consumers, offer consumers a choice, good value and serve to promote efficiency on behalf of all retailers. °
  • Integrated oil companies use margins from non-retail activities to subsidize price wars undertaken to drive independents out of business or out of the price setting process. This practice is unfair and contrary to the interests of consumers.
  • If independents are driven out of the market, it is highly unlikely that new entrants will appear and foster price competition. With only a few players, the market will become less competitive and more susceptible to higher prices over the long term.
  • There must be a reason why over twenty U.S. States have enacted legislation to protect independent gasoline dealers from predatory pricing.
  • Municipal zoning restrictions have made it difficult to secure property for retail gasoline outlets and inhibited competition. VI Analysis and Conclusions Regarding Key Issues

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