Thank you, Mr. Speaker. Earlier this session questions were raised in the Legislative Assembly regarding gasoline and propane prices in Yellowknife. There is no question that Yellowknife consumers are paying considerably more for their gasoline and propane purchases than consumers in the south.
The Department of Finance conducts a quarterly survey of gasoline and propane prices in Yellowknife, Hay River and Inuvik. The latest survey was conducted on February 28th, 2002, and found that the price of regular gasoline in Yellowknife ranged from a low of 74.9 cents a litre to a high of 82.4 cents a litre. Some retailers also offer additional discounts or promotions which further lower the price. These prices are considerably higher than the 51.0 to 58.5 cents per litre Edmontonians were paying on March 5th.
I would like to assure Members, Mr. Speaker, that Northwest Territories fuel tax rates are not the cause of this difference. At 10.7 cents per litre, the NWT tax rate is only 1.7 cents higher than Alberta's and is considerably lower than Saskatchewan's tax rate of 15 cents per litre, Ontario's rate of 14.7 cents per litre and Quebec's rate of 18.3 cents per litre, which includes retail sales taxes. The NWT rate has remained unchanged since 1997.
The territorial tax rate comprises only a small fraction of the total price of gasoline. The retail price of gasoline in Yellowknife is composed of the federal excise tax, the goods and services tax, the NWT fuel tax, the Edmonton rack price and retailer's margins. The two principal determinants of the pump price of gas in Yellowknife are the Edmonton rack price and the retailer's margin, neither of which are subject to government control. On February 26th the Edmonton rack price was 26.1 cents per litre. Given a retail price of 82.4 cents per litre, this would make the retailer's margin 30.2 cents. However, the retailer's margin must cover the cost of transporting the gasoline from Edmonton to Yellowknife.
An Edmonton retailer pays the same rack price as Yellowknife retailers, and charging 56.8 cents per litre receives a margin of 8.7 cents per litre. Edmonton retailers can survive on a margin of this size because they sell much larger volumes of gas than Yellowknife retailers. On average, urban stations sell from three to six million litres of gasoline per year, which is approximately 400 to 800 litres of gasoline an hour. This allows them to cover their operating costs with lower margins. In addition, many southern retail outlets make the majority of their profit from their convenience stores, coffee shops and car washes, rather than on low-margin gas. The key determinant of the price at the pump is not taxes, but rather the volume of gasoline sold. Because Yellowknife retailers sell much smaller volumes of gas, they must charge more to cover their fixed and operating costs.
In order to determine whether the retailer's margin at 30.2 cents a litre on a pump price of 82.4 cents is excessively high, one would have to analyze the local retailers' fixed and operating costs and compare their costs to the industry standard. However, we do not have this information. Based on a survey from March 2000, we have some indication that retail margins are higher than they were a year ago. On the other hand, retailers have to cope with increasing wage rates, transportation charges and other costs.
With respect to propane, prices in Yellowknife have dropped from their March 2001 historical high of 63.9 cents a litre. As of March 5th, 2002, the price for auto propane in Yellowknife was 56.8 cents a litre. This is considerably higher than the auto propane price of 29.9 cents a litre Edmonton consumers currently enjoy. The discrepancy in price between Yellowknife and Edmonton is not due to fuel taxes, as this government does not levy fuel tax on propane. The difference is strictly the result of retailer margins, including transportation costs which are not subject to government control.
Mr. Speaker, I share Members' concerns about the high gasoline and propane prices in the NWT. However, I do not believe that the tax rate is the cause, nor will lowering taxes make a substantial difference in prices. In the long term, we must work towards lowering the cost of living in the North by reducing transportation costs and ensuring a competitive retail environment. Thank you, Mr. Speaker.
-- Applause