Monday, June 12, 2000

Exclusive: OPEC blames government for record gas prices OPEC 40% of price at the pump is tax, survey finds

Claudia Cattaneo National Post

CALGARY - Canadians should blame their government rather than oil producers for record-high gasoline prices, the head of OPEC said yesterday in an exclusive interview with the National Post.

Rilwanu Lukman, the secretary-general of the Organization of Petroleum Exporting Countries, said the producers' organization is a "whipping boy" when gas prices escalate sharply, as they have recently, but crude oil accounts for only a fraction of the price drivers pay at the pumps.

"People should look at the taxation regime of their country and they will find that a lot of the money they are paying, they are paying to the government," said the Nigerian, who painted OPEC as a group of Third World countries wanting a fair price for their products but also concerned about consumers.

Mr. Lukman is in Calgary for this week's World Petroleum Congress, and his speech is keenly awaited by financial markets as well as by the 3,000 delegates here.

Posted gasoline prices across Canada jumped last week to the highest level ever, averaging 75.3" a litre, with taxes accounting for 30.6", or 40%, of the price, according to a survey by MJ Ervin & Associates, a leading research firm based in Calgary.

Prices ranged from 83.3" in Montreal for a litre of regular gas at self-serve pumps, to 65.5" a litre in Edmonton.

Michael Ervin, the firm's president, said the increased price of crude oil, to around $30 a barrel, was the major factor in the current high gas price. "In addition to that, however, would be higher demand for gasoline, which has put upward pressure on wholesale gasoline prices."

The current gasoline prices are even higher than 10 years ago, when crude spiked during the Gulf War, because there's more tax now, Mr. Ervin said.

Paul Martin, the Finance Minister, said in March he was willing to lower gasoline taxes, but only if the provinces were willing to cut theirs at the same time.

Jean-Michel Catta, a spokesman for the department, said the offer is still on the table, but remains in limbo because the provinces don't seem to be interested.

"Generally speaking, the reaction wasn't very positive to the idea, or there wasn't much interest at this point to discuss it," he said.

The federal government collects 10" a litre on regular gasoline, while provincial taxes range from 9" a litre in Alberta to 16.5" a litre in Newfoundland. In addition, there's the 7% federal goods and services tax and provincial sales taxes.

OPEC doesn't regard current crude prices as excessive, but wants to know whether they're being artificially inflated by a U.S. policy on reformulated fuel which is squeezing volumes in the world's biggest market for refined products.

"We tend to be very cautious about jumping to conclusions or jumping to decisions," he said, noting the issue will likely be informally discussed among delegates from OPEC countries attending the congress.

"This is not the time to pour infinite quantities of oil into the market. It could boomerang. So if we are going to increase, we should increase it just enough to balance supply and demand."

Observers said Canada's federal and provincial governments had been hoping the problem high gasoline prices would go away on its own, once crude prices moderated after OPEC decided in March to increase production.

However, crude prices have been creeping back up, leading to a return of consumer anger and speculation about whether OPEC would bump up production quotas once more when its members meet again June 21.

Mr. Lukman, a mining engineer who has headed the oil cartel since 1995, said he was also meeting yesterday with Ralph Goodale, Minister of Natural Resources, to discuss more co-operation.

Canada has common interests with OPEC because it's a major energy producer, he said. "I am sure that they [Canada] wouldn't be jumping for joy if the price went down to $10 a barrel," he said, adding: "If they think that OPEC is doing a good job of keeping prices at reasonable levels and that they stand to benefit from this particular exercise, they'll find a way of supporting it, or at least not opposing it."

He noted other major non-OPEC producers like Russia and Sweden are working closely with the cartel to maintain price stability, such as attending meetings as observers.

http://www.nationalpost.com/home.asp?f=000612/315173

-- Martin Thompson (mthom1927@aol.com), June 12, 2000