MPs return to the Hill early for meeting on soaring gas prices 
by Romeo St. Martin

[PoliticsWatch Updated 12:15 p.m. September 21, 2005]

OTTAWA  — The Commons Industry committee is set to hold a special meeting on soaring fuel prices and regional and rural price differences Thursday, days before the Parliament begins its fall sitting.
   
Oil executives and government officials will appear before the committee for the whole day. 

The special meeting comes as gas prices have risen on average 20 cents a litre over the past year. 

And another spike is expected as Hurricane Rita - a category four storm -- moves in the Gulf of Mexico towards the Houston area, home to 10 oil refineries representing as much as 13 percent of the U.S.'s capacity.

"I thought it was an issue that required our attention immediately," said Liberal caucus chair Andy Savoy, who was one of the MPs who helped spearhead the special meeting. 

Rising energy costs is quickly becoming a major issue in Ottawa. 

Last week the Toronto Star printed a story headlined "Ottawa fears petro-rage," explaining how Liberal MPs are concerned that rising fuel costs will spark voter anger over the winter heating season. 

Also last week, Catherine Swift, the president of the Canadian Federation of Independent Business, released an open letter to Prime Minister Paul Martin in which she said the rise in gas prices across the country is having "a major negative impact on the Canadian economy."

While all parties and groups recognize the direct and indirect impact rising fuel prices are having on the economy, there is a difference of opinion about what Ottawa can do to lessen the burden. 

The Conservatives and business groups believe the government should stop profiting from rising gas prices by reducing federal taxes at the pumps. 

The Canadian Taxpayers Federation estimates that one-third of the total cost of gasoline is taxes. 

For example, when motorists in Ontario go to the pumps, they pay:

> 8.5 cents in federal gas tax
> 1.5 cents in federal deficit elimination tax
> 14.7 cents in Ontario fuel excise tax 

And then the GST is then applied to the gas and the taxes. 

The Canadian Federation of Independent Business also wants Ottawa to cut taxes. 

"With respect to federal taxes, a good first step would be the elimination of the 1995 budget measure that increased the gas excise tax by 1.5 cents per liter to help tight the federal deficit," Swift wrote in her letter to the PM.

"While the deficit was eliminated in 1998, the tax has remained. A second step would be to eliminate the tax-on-tax anomaly that allows the GST to be charged on top of the base price of gas, the federal excise tax and provincial taxes."

Finance Minister Ralph Goodale, however, has designs to continue spending the government's GST windfall. 

Speaking in Montreal last week Goodale said one of the options being considered is sending increased GST revenues to the provincial governments. 

Goodale said cutting federal gas taxes would do little to benefit consumers. 

"The consumer would be paying as much or more, the government would have less revenue and only the oil industry would be better off," he said.

Conservative MP Monte Solberg, however, said sending money to the provinces will not help consumers. 

"What they should do is just give it directly back to motorists in the form of lower taxes and help the people who are actually getting harmed," he said. 

Solberg said the Conservatives would like to have the GST charged on existing gas taxes - the so-called tax on the tax -- removed. 

"We don't think the government should benefit off the misery of motorists."

Solberg said wanting to examine why gas prices are soaring without a serious look at reducing federal taxes seems pointless. 

"This is ridiculous. We have to remember that gas prices have gone up all over the world because demand has gone up. For them to hold a meeting to ask oil executives why fuel prices are going up, why don't they just read the newspaper and they'll know.

"So the question is, what do you do about it? The answer is, the best thing you can do is take some of the sting out by lowering fuel." 

But for Liberal MP Savoy, lowering gas taxes is an experiment that has been tried and failed in his province of New Brunswick in the early 1990s when then premier Frank McKenna reduced fuel taxes only to see it have no impact on price. 

"(This year) Gas increased roughly 50 cents a litre," explained Savoy. "Of that increase there was seven cents of tax in New Brunswick. Saying it's the tax that's causing the increase or implying that governments are the cause of high gas prices is a little naïve in my mind."

Savoy, who said he is aware that rising gas prices are market driven, said the committee will try to find out what other forces are causing gas prices to rise and the reasons for regional price differences. 

"In terms of the soaring gas prices, where's the explanation? Is anybody unduly profiting from this? Where was the money made? People want explanations."

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