Following is complete text of the Energy Statement by the Hon. Donald Macdonald. Minister of Energy Mines and Resources in the Federal Government. The statement was read in the House on Thursday evening. November 1st, 1972. It is reproduced in the D. O. B. in detail due to the number of requests for actual copy on the statement and the disturbances that it has caused within the Canadian oil Industry.
Hon. Donald S. Macdonald (Minister of Energy, Mines and Resources): Mr. Speaker, on September 4 the government asked the oil industry to refrain, on a voluntary basis, from further price increases to Canadian consumers before January 30 of next year. This price restraint would apply except where, to the satisfaction of the Minister of Energy, Mines and Resources. the increase in the cost of imported crude oil warranted a Canadian price increase. The government was concerned then, as now, with the inflationary push and its Impact on the Canadian consumer.
During September and October, crude oil import costs have risen substantially. One price rise alone by the Arab producing states, followed by Venezuela, was in the vicinity of a 35 per cent increase. My department and the National Energy Board have been carefully monitoring these changes. We have received requests from major refiners using foreign crude oil in Quebec and the Atlantic provinces to increase product prices. These requests reflect only actual increases in crude costs which have already been borne by importers. Each company has experienced different cost increases depending upon the source of the crude and varying ocean transportation costs.
I am today notifying refiners in eastern Canada that the government will have no objection to any decision on their part to raise product prices to levels consistent with each company's crude cost experience in September and the first half of October. The average increase in gasoline and heating oil prices east of the Ottawa Valley line will be about 2 cents per gallon.
Apart from the product price increases which I have just described and which will become effective immediately, our best indications suggest that the average price of international crude delivered at Montreal, from the eastern and western hemispheres, will rise by upward of $1 per barrel during November. Refiners in eastern Canada supplied by international crude will, at a future time, be permitted to reflect crude cot increases for the second half of October and for November in product prices.
A significant part of the market for home heating oil in the central Ontario area is supplied by imports of home heating oil from overseas. The rapid increase in demand for International supplies of home heating oils, with the consequent price increase, has made it difficult for Ontario suppliers to secure adequate supplies before the close of navigation in December.
In these circumstances, it is the government's intention to entertain requests by marketers for immediate price increases in home heating oils west of the Ottawa Valley line and particularly in Ontario and British Columbia. This actin w III both assist in the securing of supplies west of the Ottawa Valley line and will offset any tendency it these supplies to move out of those markets. With the exception of this product, it is the government's intention to request continuing voluntary restraint at current price levels west of the Ottawa Valley line on the part of the Canadian oil industry until February 1, 1974.
The government is, and intends to continue, watching this situation closely and will relax its restraint program further If, view, such action would materially assist in what must be its predominant concern consumers, the provision of adequate supplies for Canadian consumers.
The National Energy Board has advised me that if western crude prices continue at their present restraint level through December, the just and reasonable price for exports to the United States would, for December, generally be at the level of about $1.90 a barrel higher. I am able to announce, therefore, that I shall be seeking authority from parliament to raise the level of export tax from 40 cents per barrel in November to $1.90 per barrel for December exports.
This tax rate of $1.90 per barrel is a direct measure of the savings to Canadian consumers west of the Ottawa Valley line brought about by the government's policy of continuing restraint.
I would like now to say a few words about the Canadian crude oil and products supply situation. The outbreak of hostilities in the Middle East and the moves by Arab countries to embargo oil deliveries to the united States and the Netherlands and to impose cumulative reductions in their production rates have cast significant uncertainty on the crude oil supply situation for eastern Canada. It might be that Canada will be affected by the reduction of oil production in Arab countries. Any significant curtailment in our imported crude oil supply is bound to have an unfavourable impact upon the product supply situation in eastern Canada.
Our ability to deal with shortfalls in crude oil supply to eastern Canada is under extensive study, both within the government and in concert with industry. The government has established a technical advisory committee on petroleum supply and demand under the chairmanship of the National Energy Board. The committee, which includes representatives of companies importing and refining foreign crude oil, is set up to advise as to the outlook for petroleum products supply and measures to bring supply and demand into better balance.
The exact magnitude of the possible oil import curtailment which we face is uncertain and will remain so for some time. Prior to the Middle East fighting. stock levels for oil products were generally in a fair position. The supply of heating oil in Ontario and eastern Canada for the coming winter appeared to be in delicate balance against demand, assuming normal cold weather. If imports of crude oil cannot be maintained at programmed levels, this balance will obviously be disturbed.
The pre-hostilities situation In regard to motor gasoline supply in eastern Canada was generally satisfactory with a seasonal inventory buildup foreseen. Curtailment of crude oil imports would affect this build-up, with a consequent impact on next season's gasoline, ever if it were possible to meet winter requirements in full.
On the prairies the situation is satisfactory in regard to supply of all product categories. Pre-existing concerns, that is to say, concerns which were prevalent prior to the problems arising from the Arab oil interruption, about the supply of heavy oils in British Columbia have been heightened because this region normally imports significant amounts from the United States which now, of course, faces its own supply difficulties.
In the light of this over-all supply situation, it seems prudent to consider carefully appropriate means to reduce energy demand throughout Canada but particularly for those products and regions which I have specifically mentioned. A number of provincial governments have already been contacted, and others will be, to outline the nature of the crude oil and product supply situation as it is emerging and to inform them of the price developments which I have just mentioned.
The government is considering further steps, and has an allocation program for application at the wholesale level which will be introduced if a more serious supply situation becomes apparent. Although it is recognized that security of supply for priority users must be protected, the government is reluctant to interfere at this stage with the normal marketing arrangements of the industry. At this stage I am calling upon Canadian consumers, municipalities, heavy industry and provincial governments to study means of reducing consumption on a voluntary basis. We will be In touch with them to exchange ideas, develop and provide details of our conservation program.
Before resuming my seat, Mr. Speaker, I would like to take this occasion to express my appreciation to the oil Industry, with one notable exception, for the co-operation that has been evident from them in the past two months in keeping Canadian prices down. The notable exception is Gulf Canada. I feel it necessary at this time to call attention to a report which appeared in the Toronto Star on Wednesday, October 31, in which Mr. McAfee, the president of this corporation, said with respect to the fact that Gulf Canada broke the freeze restraint and I quote from the Star report:
"When we hadn't heard from the minister from October 12 to October 29, we figured the increase was okayed or the government was stalling."
I would just like to quote from a telegram sent to the same Mr. McAfee by my deputy minister, in my absence from the country, on October 12, in which was repeated what had been stated to Mr. McAfee earlier, that the government wished the company to continue in price restraint. I am prepared to lay a copy of the telegram on the table if the House wishes. I quote one paragraph as follows:
"As I told you during our telephone conversation today in response to your letter to the minister of October 9, 1973, requests for price increases have been received from a number of companies and the department has the question of all cost increases under active review. The minister will take to cabinet shortly a proposal for price increases due to higher crude oil import costs. We request that you continue to refrain from price increases until the cabinet takes a decision in this area."
Therefore contrary to what Mr. McAfee has been quoted as saying, he was specifically requested to refrain from further action until cabinet had taken a decision.
I and other members of parliament have been to symposia and meetings over the years to talk about good corporate citizen ship, but this American president of that American corporation has set this House a good example of bad corporate citizenship.