"So what do you have to say about gas prices now Mr. Taxfighter " This was the greeting that welcomed me at a family gathering this past weekend. "There gouging us," one uncle fumed. Another told me that "gas is cheaper stateside." And the final kicker was "the government should freeze prices."

As the CTF pointed out in May of this year, the real reason for high gas prices is high gas taxes. Indeed there are several myths out there about this whole issue.


Myth: The big oil companies are engaging in price-fixing. The big oil companies are engaging in price-fixing.

Fact: Previous studies by the federal Competition Bureau in the 80's and in 1997 have found no evidence of price gouging. "We never found any evidence of an overall price-fixing conspiracy amongst the majors and/or regionals across the country," says the 1997 study. And a February 1998 study co-sponsored by Industry Canada and Natural Resources Canada, and the Canadian Petroleum Products Institute found that "… vigourous competition exists within the Canadian petroleum marketing sector."


Myth: Uniform pump prices in geographic markets are "common sense" evidence of price-fixing. Uniform pump prices in geographic markets are "common sense" evidence of price-fixing.

Fact: This uniformity reflects a simple business reality that dealers do not wish to lose market share to nearby competitors. Consumers react to price fluctuations as little as 0.2 cents/litre and gas is one of the few commodities that you can window shop for at 120 km/h (oops, I mean 100 km/h since I would never dare go over the highway speed limit). This uniformity reflects a simple business reality that dealers do not wish to lose market share to nearby competitors. Consumers react to price fluctuations as little as 0.2 cents/litre and gas is one of the few commodities that you can window shop for at 120 km/h (oops, I mean 100 km/h since I would never dare go over the highway speed limit).

Milk, diapers, bread, cars, pencils, fast-food meal combos are all similarly priced amongst different retailers, why is it that only gas prices elicit collusion charges


Myth: Prices always rise on long weekends.

Fact: In 1997, between Easter and Thanksgiving (six long weekends in total), prices rose on three long weekends and fell on the other three in Southern Ontario, Canada's most competitive gas retailing market.


Myth: Canadians pay more for gas than Americans do. Canadians pay more for gas than Americans do.

Fact: Wrong. As the Industry Canada study pointed out, "Canadian pump prices in urban markets have been roughly equal to - or even less than - U.S. pump prices for several years, if the higher Canadian tax content is excluded."

In fact, a breakdown of consumer prices shows that we pay the second lowest pre-tax price for gas, just slightly behind the Germans. Germans pay 85.8 cents/litre (US$) which is 18.8 cents retail cost and A whopping 67 cents for taxes. In Canada we pay 39.6 cents/litre (US$), broken down as 19.7 cents cost and 19.9 cents for taxes. Our American friends pay 31.8 cents/litre but the bulk of this is the retail cost of 21.7 cents (2 cents more expensive than Canada) and a mere 10.1 cents in taxes.


Myth: If the government were to freeze prices, consumers would benefit.

Fact: Wrong. Freezing prices would ensure that they would be frozen at artificially high levels. Consumers would never benefit from gas wars and such a policy would provide a huge barrier to entry for players wishing to enter the retail market. Wrong. Freezing prices would ensure that they would be frozen at artificially high levels. Consumers would never benefit from gas wars and such a policy would provide a huge barrier to entry for players wishing to enter the retail market.

Ottawa collects over $5 billion in gas taxes each year but devotes just 5% back to road construction and highway development. Ontario fares no better by collecting about $3.6 billion in gas taxes in licensing fees but returns only 41% of this amount for roads and highways.

If Canadian politicians were serious about protecting taxpayers and consumers, they would end tax-gouging at the pumps. But why face the problem when you can blame someone else … like the oil companies