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Saturday, March 13, 2010

Gas Q&A: All Those Questions You've Always Wanted To Ask An Oil Company Exec.

2007/03/01 | CityNews.ca Staff

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Gas Q&A: All Those Questions You've Always Wanted To Ask An Oil Company Exec.

What do you do for a living?

Whatever it is, it can't be quite as taxing as what Jon Hamilton has to do when he heads to the office every morning.  

He's a spokesman for Petro-Canada, one of the big oil companies currently under the gun over the gas shortage and the price spikes in the GTA.

Whatever else you might say about his job, at least he's willing to field all comers.

Hamilton stopped by CityOnline Thursday and although he was dressed in the requisite suit and tie, you might have thought he was wearing a T-shirt with a bull's eye on it.

Angry caller after angry caller pelted him with questions about the shortage, the profits and the perceived collusion between oil companies and the government.

Here are just a few of your questions and his answers.

Q: The oil companies insist the shortage isn't causing prices to spoke. How can you possibly expect us to believe that?

A: Well to the conspiracy theorists out there, the timing looks pretty good. You can throw the black helicopters and all that in there.

"All you have to do is look outside the GTA, look outside Ontario. See what's going on across Canada. See what's going on in the U.S. And product prices have gone up right across the board. That's more a result of a number of factors. Crude oil going up in the last month or so. A big run on heating oil and all the kinds of things that make most people's eyes glaze over.

"But if you look outside Ontario, that's an impact that has been spread and that's not because of an issue in Ontario. That's because of a North American supply issue. So prices [are] higher than we're used to seeing. We don't like to see that, but that's the reality today."

Q: Why is a problem at Esso affecting other companies who don't depend on the Nanticoke plant?

A: Our competitors have a lot of sites and what has happened, as those have closed, the drivers have moved over to our retail sites to fill up. It's kind of overwhelmed our ability to replenish. We have product available. It's just getting it to the sites.

"You're talking about 55,000 barrels a day of gasoline into the Ontario marketplace on any given day so that's a huge gap to fill.

Q: The CN strike is over. Shouldn't that ease the problem since you bring in product that way?

A: We never have. We don't move much petroleum by rail in Ontario. We have a pipeline that feeds our terminal in Oakville ... The problem for us has been our retail sites are not built to hold enough product to meet this kind of demand.

Q: Why are you closing some stations during the crisis?

A: We could have opened our taps and been a hero for a day. And be at zero in a week. We need to get as many people as possible. We have to throw out conventional thinking and say how hopefully we've turned a corner.

Q: Why can't I get premium gas?

A: We have premium gas. What happens as you start to run out of product at a site, you start to downgrade. So you work through the available inventory you have. So as the premium disappears you put mid-grade at the regular price.

Q: If it's all market-driven, why are gas prices so much lower in the U.S.?

A: Because the tax structure is much lower. You are looking at 15 cents a litre, compared to 40 and 50 cents in Canada.

Q: Why do the prices change on the weekend and sometimes over the course of a day? Surely world markets aren't changing that fast.

A: That's because we're chasing customers. The price in the GTA will drop 8 to 9 cents a day. That doesn't happen anywhere else in the country. What has happened over the last two weeks or so is that the price has somewhat stabilized because dropping your prices is a tactic to bring customers on to your sites. When there are a limited number of people with gasoline to be sold, you will not get into the vicious price wars.

"There is competition out on the street level and people may or may not believe that.

"What happens is you get a big drop in the price because there is a price war going on and the commodity markets move up and you have to move your prices up. All of a sudden you're looking at a 10 cent a litre jump and everybody says what is going on?"

Q: Why don't you just build more refineries?

A: Building a $5 or $6 or $7 billion refinery with a few good years of returns is a pretty risky investment. That's why you haven't seen a lot of people step up. If you own a refinery, the billions of dollars you're investing in the refinery must meet environmental regulations."

Q: What about those record profits every single quarter? Are you guys just ripping off the public?

A: In this country, we have a healthy oil and gas sector. And that's a good thing ...

"If you're going to look at a $10 billion investment in the oil sands to keep the future oil coming forward, you need to be able to make some money to afford those types of things.

"People look at the amount that is charged per litre and they think you make a good chunk of that. You don't, it's a very competitive business. Years ago, you could have a couple of gas pumps out front and put your kid through school and have a nice life. Nobody is opening those sites anymore because there is not enough available per outlet to keep a business going."

Q: The government and the oil companies are in bed together and that's why the prices never go down and no one can ever 'prove' collusion.

A: There is no government ownership of Petro-Canada. Years ago that ended. You know, you see the price bounce around. It's for good reason. It works to the consumer's advantage ...We haven't done a very good job of convincing them of that, clearly.

"We're competitive with the United States and they have a much bigger infrastructure. A lot more people. A much denser population. We're spread across a few miles north of the border."

Q: You make a lot of your profits at those stores attached to the stations. We should boycott those, as well as specific gas stations to force prices down.

A: We make money on gas. We're not going to hide behind that. We're publicly traded companies. Our books are looked up and down, right left and every which way ... We have a strong mining and forestry sector. That's a good thing.

"[But] a strong oil sector, that's bad. We're in the customer service business and we service about 800,000 customers on a daily basis across this country. And we're out to do right and to provide them with the products and services they want at a price that is reasonable. We probably disagree on what is reasonable. But we will not give it away."

Q: Are you a liar?

A: No, because I couldn't do this job if I was lying.