COAL AND PETROLEUM PRODUCTS COMMISSION (BRITISH COLUMBIA) Volume I. Report of the Commissioner The Honourable Mr. Justice M. A. Macdonald relating to The Petroleum Industry (Being Paragraph 2 and part of Paragraph 3 of the Terms of the Commission) October 21st, 1936 VICTORIA, B.C. : Printed by Chakles F. Banfield, Printer to the King's Most Excellent Majesty. 1937. To His Honour the Lieutenant-Governor in Council: May it please Your Honour: I, the undersigned Commissioner appointed under Your Honour's Royal Commission dated the 28th day of November, a.d. 1934, to cause inquiry to be made into and concerning the matters therein referred to, have the honour to report finally on the subjects referred to in Paragraph 2 thereof, with additional incidental references arising thereout more Strictly referable to Paragraph 3. In due course a further final Report will be submitted on the matters referred to in Paragraphs 1 and 3 respectively of Your Honour's Commission. I have the honour to be, Sir, Your humble and obedient servant, M. A. MACDONALD, Commissioner. Victoria, B.C., October 21st, 1936. "PUBLIC INQUIRIES ACT." His Honour the Lieutenant-Governor in Council has been pleased to appoint the Honourable Mr. Justice M. A. Macdonald, one of His Majesty's Justices of Appeal of British Columbia, a sole Commissioner under the " Public Inquiries Act" to inquire into the following matters:— 1. The following matters respecting coal mined in or imported into British Columbia and used for fuel purposes in British Columbia:'—■ (a.) The cost of production: (6.) The manner and cost of preparation for the wholesale and retail trades respectively : (c.) The cost of transportation: (d.) The cost to dealers in British Columbia: (e.) The cost to consumers in British Columbia: (/.) The profits made by persons or corporations owning or operating coal-mines in British Columbia: {g.) The profits made by persons or corporations engaged in the business of buying and selling coal in British Columbia. 2. The following matters respecting petroleum products, that is to say, gasoline, fuel-oil, lubricating-oil, kerosene, and other petroleum products imported into or refined or produced in British Columbia and used or designed for use therein for fuel purposes, lighting purposes, or in the operation of internal-combustion engines:— (a.) The cost of importation or production: (6.) The cost of refining or preparation for use: (c.) The cost of transportation: (d.) The cost to dealers in British Columbia: (e.) The cost to consumers in British Columbia: (/.) The profits made by persons or corporations engaged in the importation of petroleum products into British Columbia, or in refining, producing, or supplying petroleum products for use in British Columbia. 3. Generally, all matters tending to show the comparative value of coal and petroleum products for economic use as aforesaid in British Columbia, and the value to the economic welfare of British Columbia of the development of industry based upon the production of the fuels enumerated, or tending to show whether or not the prices charged for coal and petroleum products respectively are unjust or unreasonable; and all such further matters as the Commissioner may consider to be incidental to any of the foregoing matters of inquiry. Provincial Secretary's Office, November 29th, 193U. A. W. GRAY, Acting Provincial Secretary. PREFACE. This volume is confined to a final report on questions outlined in Paragraph 2 of the Commission relating to oil and petroleum products, except that incidentally and for convenience as occasion arose in discussing specific topics deductions were drawn and conclusions stated more strictly referable to Paragraph 3. The Terms of the Commission will be found on the preceding page. To me the task was assigned with expert assistance to find, inter alia, the cost of production of a large variety of petroleum products in use in British Columbia, naming some of them specifically in the order of their importance—viz., gasoline, fuel-oil, lubricating-oil, kerosene, and other petroleum products. It was necessary to ascertain among other things: (1) If each product is carrying its own proper load of costs without shifting it to other products and to another class of consumers; (2) if these products are manufactured and distributed at a reasonable profit or at a loss; (3) if a fair relation is maintained between cost and selling prices; and (4) if the costs of production and of wholesale and retail marketing and distribution are unreasonably high. Resolutions passed by public bodies (and filed as exhibits) disclosed the view, without definite data to support it, that users of gasoline in British Columbia were paying too much for that product. It was also felt that fuel-oil produced from imported crude in competition with coal produced at home was sold at uneconomic prices, with losses, if any, recouped by higher selling prices for gasoline. The Oil Companies have two major products—namely, gasoline and heavy fuel-oil for sale, the latter competing with or displacing coal. They might, therefore, by charging excessive prices for gasoline, sell fuel-oil either at a loss or at such a price as to constitute unfair competition with coal. It would follow, too, that if sold at a loss, or at an uneconomic price, the large body of consumers of gasoline throughout the Province would, if excessive prices for that commodity were exacted, be virtually paying a bonus to industries using heavy fuel-oil. It was therefore important, if the inquiry was to be of any value, to obtain the actual costs of production of the different petroleum products, more particularly the two major products—gasoline and heavy fuel-oil. It was not expected that these costs would be secured with minute scientific accuracy, but rather with reasonable certainty. Although it is not possible to say with exactitude what percentage, for example, of executive overhead, to take one illustration only, should be assigned to the separate products produced from crude, yet substantially accurate costs can be obtained and ought to have been produced. It was found that real costs were not presented. The financial statements produced were at first thought to contain actual costs, but it was found on further study that they could not be accepted as such. A bookkeeping system is followed by the Oil Companies known as the Sales Realization method, wherein the selling price of products is taken as the basic factor in ascertaining the costs of each individual product. It seemed to me—and I so stated at the outset when this method was first advanced—that it appeared to be an illusory system of cost accounting, but I preserved an open mind on the subject. After further consideration, however, that view was adhered to. The Tariff Board of Canada, in an inquiry conducted this year of similar import in so far as the need of obtaining basic costs were concerned, and in which they had for their consideration as part of its record the evidence taken in this Inquiry (Mr. O'Halloran, Chief Counsel, acting on behalf of the Provincial Government before the Board), refused for their purposes to accept this method of ascertaining costs of individual products. If we had accepted the Sales Realization method it would have been better to close the inquiry at that point and to report accordingly, because under such a system high prices could be justified irrespective of the real costs. By this method costs fluctuate with changing realized prices. If, for example, the retail price of gasoline to the consumer should be increased, the cost of its production would also be increased (in the books only), keeping the selling price virtually in the same relation to costs as before the advance. And yet the real costs of production might not be changed at all. A House of Commons Committee in 1932, inquiring into gasoline prices and accepting their auditor's report, which was based on Sales Realization, reported to Parliament that " the price of gasoline to the Canadian consumer is not unreasonably high." In my opinion, if I may say so with the greatest respect, that PREFACE. conclusion was erroneous because their auditor's report was based on the method of bookkeeping referred to. This Sales Realization method was rejected, therefore, for reasons fully disclosed in Chapter I. as useless for the purpose of this inquiry. It was then necessary to resort to other methods to ascertain indirectly and with reasonable accuracy costs not revealed directly by the company methods. In doing so the expenditure of a large amount of time and labour (and, I fear, expense) was unavoidable. A reason, it was said, accurate costs of separate products could not otherwise be obtained (and that therefore the Sales Realization method had to be used) was because of multiplicity of products produced from crude oil. The fact is that with the Imperial Oil Company, and to a greater degree with the Shell, the two main products from British Columbia refineries—namely, gasoline and fuel-oils—comprise 97.07 per cent, of the whole output volume. Having, therefore (because of this impasse), resorted to other methods to find production and other costs with reasonable accuracy, it was felt to be fair, instead of contenting ourselves with stating conclusions without supporting data, to fully set out each successive step taken with detailed evidence and full reasons for conclusions, as the basis for, and a background to, the compilation of tables of costs finally prepared and found in Chapter XII. In this way, one who cares to study in detail- (and intensive study is necessary) the facts presented in this report will be in a position to criticize or support it wholly or in part. It was also felt that, in addition to stating clearly the basis for conclusions, the amount of research undertaken with the help of many advisers might be useful in the future if fully recorded. For this and other reasons complete references in the greatest details will be found in the evidence and the exhibits filed upon which conclusions are founded. Because of the facts stated—namely, absence of actual costs and the necessity of resorting to indirect methods—this branch of the inquiry was necessarily greatly prolonged and involved the expenditure of a considerable sum of public money. It was essential in an investigation of this nature, with ramifications that could not be foreseen, but which when disclosed had to be followed, that I should have the assistance not only of competent counsel (and I was most fortunate in that respect), but also of chartered accountants, chemical, combustion and. other engineers, as well as others technically qualified throughout the whole course of the inquiry. It was necessary to have this technical assistance at hand constantly and to employ others for special work. I also thought it necessary and advisable to have chartered accountants carefully scan and check all the figures and the numerous tables set out in this report. This work occupied many weeks. These figures and tables, therefore, have been authenticated by chartered accountants and appear in the form now submitted with their approval. I would not take the responsibility of signing a report without this close scrutiny of tables of basic value in reaching conclusions upon which the chief value of the report depends. With their assistance, coupled with the advice and direction of chemical engineers, not on a few problems but on all relevant points, and with the invaluable assistance of Mr. O'Halloran, to whom I am greatly indebted for painstaking care and detailed assistance of the highest value, I feel that I may commend the report with confidence; without it I would not do so. I do not suggest that it is wholly free from error. Error is possible where so wide a range of inquiry is undertaken in respect to highly technical subjects. There was difficulty, persisting throughout, in defining terms with precision to assure that the same meaning was given to the subject-matter under discussion by the witness and the questioner. I am convinced, however, that on all fundamental questions of a basic nature from which conclusions are drawn and findings made the report is as free from error as close study and attention to details could make it, aided as we were by technical advisers on each conclusion arrived at. I do not say that the views of advisers were accepted in all cases. I thought it necessary, where differences of opinion arose among technical advisers, to call in other professional assistance, and having secured their views formed my own final conclusion. All these features necessarily added to the cost, already considerable, from the ordinary and usual outlay for stenographic, legal, and chartered accountants' assistance. It was my duty to control the scope of the inquiry and also to see that the investigation was thorough and exhaustive having in view the terms of the Commission. Any inquiry less thorough would be useless and misleading. The report discloses that consumers have been paying excessive prices for gasoline notwithstanding that by reason of water transportation and proximity to PREFACE. ix. crude-oil resources it should be cheaper in British Columbia than elsewhere in Canada. These prices ought to be reduced to the point outlined in the Report, and if so, based on the 1934' consumption and the 29 cent per gallon price prevailing when this Commission was issued a saving of $4,672,816.00 annually would be effected. Handicaps suffered by fruitgrowers and fishermen as revealed in the report in the payment of excessive gasoline prices in relation to their competitors should be removed. Large fuel-oil gallonage differences referred to in the report reveal, certainly the possibility, if not (as it would appear) the actual fact, of serious losses of Provincial revenue in the collection of the fuel-oil tax and substantial loss of Federal revenue in Customs duties. By exempting legislation passed in 1932 (chapter 51, B.C. Statutes) railways do not pay the V2 cent fuel-oil tax on consumption in locomotives within the Province. This involves an apparent loss of revenue of $194,295.79. Benefits should also accrue to the coal industry and to consumers of gasoline if heavy fuel-oil is made to carry its own burden of costs. Every tub should stand on its own bottom. In these and other directions savings may be effected, local industries assisted, further revenues obtained, and additional purchasing power left in the hands of consumers of gasoline. A great mass of material filed as exhibits in the form of contracts and statements was submitted and tentatively received as confidential. I stated on several occasions that, if it became necessary to refer in the report to these documents and exhibits to properly carry out the Terms of the Commission, I would do so. With the rejection of the Sales Realization method, no alternative remained except to use all the evidence before us, including the exhibits referred to. However, wherever practicable, statements and contracts are used as data, not in their entirety but in such a form (i.e., taking extracts therefrom) that the full tenor thereof is not necessarily exposed to the scrutiny of others. It must, of course, be remembered that this and similar investigations are carried on under a " Public Inquiries Act," not a Private Inquiries Act. However, due to the methods of cost accounting by the companies (Sales Realization) and the paramount necessity of carrying out the Terms of the Commission, it was impossible to avoid use of this material to the extent disclosed in the report. It does not follow that these exhibits deposited with the Government will be open to the inspection of all who may wish to examine them. I am greatly indebted to the following for assistance in this inquiry:— Dr. W. A. Carrothers, Chairman, Economic Council, as Economic Adviser; Kenneth Moodie, Combustion Engineer, Provincial Department of Public Works; W. F. Seyer, Associate Professor of Chemistry, University of British Columbia; R. R. West, Lecturer in Mechanical Engineering, University of British Columbia; J, P. Hogg, Associate Counsel to the Commission; G. F. Gyles, C.A., of Messrs. Price, Waterhouse & Company, and staff; J. H. Young, C.A.; H. G. Hinton, C.A.; H. B. Pratt; G. U. Clark, C.A.; L. S. V. York, of George A. Touche & Company; and Smith, Emery & Company, Engineers-Chemists, San Francisco, California. I also wish to testify to the invaluable aid given by Mr. R. W. Hartley, Victoria barrister, as Secretary to the Commission. Apart from his purely secretarial duties, he became conversant with all branches of the inquiry and proved to be of the greatest assistance on a variety of questions constantly arising. His work throughout and in the preparation of this report was most efficient. For convenience, a general summary to the report will be found in Chapter XV. A further synopsis in skeleton form based on the more detailed summary in Chapter XV. will be found at the first of the report. M. A. MACDONALD, Commissioner. Victoria, B.C., October 21st, 1936. SYNOPSIS OF THE MAIN FEATURES CONTAINED IN THE SUMMARY FOUND IN CHAPTER XV. 1. No crude-oil hitherto has been produced in British Columbia. We are therefore dependent upon foreign sources of supply which might conceivably in emergencies be withheld. 2. That type of crude-oil is imported by the refineries into this Province having a heavy fuel-oil content and a light gasoline content; that is, a crude that will produce comparatively much of the former and little of the latter. 3. There are four refineries in British Columbia—Imperial, Shell, Home and Standard— with a capacity of 12,000, 3,500, 1,000 and 2,000 barrels of crude per day, respectively. 4. Union Oil refinery is only used to compound and blend lubricating-oils. Its gasoline and fuel-oil is largely processed by the Imperial and sold to the Union, after which the Union sells it to the public. 5. There is no substantial difference in the quality of gasoline sold under different names and labels, and costly advertising is not based upon real differences in quality. 6. Heavy fuel-oil is the main objective of refineries in this Province, with gasoline secondary. As fuel-oil is the rival of coal, and we have abundant coal resources, it would appear that gasoline should be the primary requirement and fuel-oil the secondary. 7. Heavy fuel-oil is sold in British Columbia at uneconomic prices and does not carry its own fair load of costs. These costs are unjustifiably shifted to gasoline, with, however, a net profit on the crude oil. 8. Consumers of gasoline have for many years been paying excessive prices for gasoline to enable oil companies to sell heavy fuel-oil at a loss. Gasoline users have therefore been paying in effect a bonus to heavy fuel-oil users, not to benefit, but to impair the local coal industry. 9. On the other hand, furnace and lighter fuel-oils are sold at a profit. 10. The oil companies have two major products, heavy fuel-oil and gasoline. They may and do sell heavy fuel-oil at a loss. The Tariff Board recently, in confirmation, with the evidence in this inquiry before it, said in its Report that the contention of British Columbia that refineries in this Province sell fuel-oil in competition with coal at cost or less than cost and that as a result gasoline carries the load was not successfully refuted by the oil companies. 11. Gasoline is sold and distributed by wasteful and extravagant methods to a marked degree. 12. Gasoline should be reduced in price to not more than 18 cents a gallon in Vancouver, inclusive of the 7 cent Provincial tax. It should be cheaper in British Columbia than elsewhere in Canada, because of geographic position and water transportation. 13. Even with present wasteful methods of distribution, the retail price of gasoline should be reduced at once to not more than 23 cents per gallon in Vancouver, based upon 1934 conditions (evidence as to 1935 conditions was not complete until too late in 1936 to be of use). Speaking generally, 1935 conditions were not materially different. 14. In all other points in the Province only freight should be added to the Vancouver price. SYNOPSIS OF THE MAIN FEATURES. 15. When this Commission was issued the retail price of gasoline in Vancouver was 29 cents. A reduction to 18 cents on the 1934 sales would mean a saving of at least $4,672,816.06 annually. 16. The Canadian Tariff Board, having before it as part of its record the evidence taken in this inquiry, said that the Vancouver retail price of gasoline (then 29 cents) was wholly out of line with prices on the Pacific Coast, and that there was no reason why the price of gasoline should be higher than in Seattle. 17. The retailing of gasoline should be conducted independently of the oil companies. At present this branch is a medium for advertising and part of a costly price structure. 18. The method of cost accounting followed by the oil companies (Sales Realization) did not reveal true costs of the various petroleum products and other methods had to be pursued. 19. The major oil companies control all branches of the industry from the oil well to the service station, thus narrowing the field of competition. This is known as the integrated system. It enables them to fix, control and maintain prices in all branches of the industry. 20. The retail price of gasoline is set from time to time by the Imperial Oil (controlled by the Standard of New Jersey) and these prices are followed by the other companies. 21. The oil companies own, control, or hold, under 100 per cent, agreement, approximately 93 per cent, of the gasoline retail outlets in the Province. In the main, service station operators conduct their business, including sales of accessories, as the oil companies dictate. 22. The cost of gasoline is increased by special contracts between oil companies and jobbers and large purchasers and between oil companies. 23. Extravagant wholesale and retail costs are mainly due to company ownership and control of service stations and to the integrated structure of the oil companies. 24. There are about five times too many service stations and retail outlets in the Province of British Columbia. 25. Reductions in the number of service-stations made to promote economy and business efficiency, leaving more purchasing power in the hands of the people, while involving temporary re-adjustments, would result in economic gain. 26. With exceptions .mentioned in the Report, the sale of gasoline should be confined to garages as incidental to that general business; and to bona fide independent service-stations equipped with competent motor mechanics, and which are in effect small garages. 27. In the State of Iowa, through State legislation, there has been a gradual diminution of company-owned and controlled service-stations, and features of it have been adopted by the oil companies elsewhere. 28. The service-station as now conducted is an uneconomic and wasteful method of marketing and distribution, and is in effect a means of price regulation and advertising for which the consumer should not have to pay. 29. In country districts gasoline pumps operated in conjunction with some other main business are a necessity, but the number should be reduced. SYNOPSIS OF THE MAIN FEATURES. 30. In Nova Scotia, through legislation, the number of pumps up to date were reduced from 4,000 to 2,000. 31. The differences in the retail price of gasoline between Vancouver and up country and up Vancouver Island points are not justified. These differences are much larger than those prevailing between Seattle and other equi-distant points in the State of Washington. For example, Kelowna prices (September 15th, 1935) were 11 cents higher than at Oroville, Washington, immediately south. The margin between Vancouver and Kelowna should be no greater than between Seattle and Oroville except for small freight differences. Excessive and unwarranted prices exist at outlying points. 32. The price of gasoline to fishermen and to Okanagan fruit-growers is excessive and unwarranted. It is wholly out of line with that paid by competitors elsewhere, and a serious handicap in competition in world markets because of increased costs of production. 33. A fisherman's gasoline costs him 9.30 cents more per gallon in Vancouver than in Seattle; 8.50 cents more in Prince Rupert than in Ketchikan, Alaska; and 8.60 cents more in Port Alberni than in Neah Bay, Washington. 34. The Okanagan fruit-grower pays 8 cents per gallon more than the Annapolis, Nova Scotia, fruit-grower; 10.30 cents more than the Wenatchee, Washington, fruit-grower; and 11 cents more than the Niagara, Ontario, fruit-grower. 35. British Columbia, despite its small population and its great coal resources, consumes a much greater volume of heavy fuel-oil than any other Province in Canada. Canadian railways, for example, for various uses consumed (1934) 79,758,043 gallons in British Columbia, compared with a total of 36,867,427 in all the other Provinces of Canada combined. 36. Of 41,815,587 gallons (1934 figures) used by Canadian railways as fuel for locomotives in all of Canada, 38,859,159 gallons or 92.9 per cent, thereof were used by railways in British Columbia. In Quebec railways used only 6,475 gallons and Ontario 230,201 gallons. 37. In 1934 this Province alone consumed 3% times as much fuel-oil as Belgium, twice as much as Holland, and 1% times as much as Australia; Japan and Italy, with respective populations of 68,194,900 and 42,217,000, consume respectively only 3% and 1-% times as much fuel-oil as this Province. In fact, in 1934 there were only twelve countries in the world which consumed more fuel-oil than this single Province. 38. The Union Oil, wholly owned subsidiary of Union Oil of California, although it does not manufacture any fuel-oil or gasoline itself (purchases principally from Imperial and also fuel-oil from Shell), sells 59.12 per cent, of the total heavy fuel-oil sales. The Imperial, which produces 78.37 per cent, of the total of heavy fuel-oil produced in the Province, sells 34.68 per cent, after deducting inter oil company sales. 39. The contract between the Union Oil of California and the Imperial enables the former to act as a fuel-oil and gasoline broker. It is as if these two companies, who sell 93.79 per cent, of the total heavy fuel-oil in the Province, were branches of one large organization. This is one of the reasons why heavy fuel-oil is sold at an uneconomic price. 40. Low priced fuel-oil is encouraged by the waiver and rebate clause in the " Fuel-oil Tax Act" (sec. 3, chap. 51, 1932), whereby in respect to fuel-oil used in railway locomotives the % cent a gallon tax thereon is not paid. For 1934 the gallonage was 38,859,159, involving a loss of revenue of $194,295.79. 41. There is a % cent a gallon Customs duty on the importation of fuel-oil as such. On 1934 figures there were some 86,385,328 gallons of heavy fuel-oil produced from imported fuel-oil crudes, which involved an apparent loss of $431,926.64 annually in Customs duty. SYNOPSIS OF THE MAIN FEATURES. 42. A grand total of 164,061,123 gallons of light and heavy fuel-oil was produced and imported into the Province in 1934, compared with sales of 126,775,719 gallons. After making all allowances it appears that 20,379,523 gallons are unaccounted for. In the absence of explanation it would appear that in 1934, great as was the fuel-oil consumption, some 20,379,523 gallons of fuel-oil were consumed in excess of what the records available to the Commission disclose, involving a possible loss of revenue of at least $101,897.61. (See paragraph 28, Chapter XV.) 43. The importation of gasoline in the past has been discouraged by the application of a dumping duty applied in a manner not warranted by the Statute. Had that not been done it could have been imported and sold for a price much less than that prevailing in this Province. On the other hand, with respect to fuel-oil, as to which the dumping duty ought to have been applied, it has not been applied. It has been imported into the Province in large volume for years at an unfair market value price within the precise terms of the Statute. 44. The practical working out of the tariff situation in this Province appears to be that, on the one hand, the 1 cent a gallon duty on imported gasoline, ostensibly for the protection of gasoline refining in Canada, is taken advantage of by the oil refineries to import, in effect free of duty, some 36.69 per cent, as much gasoline fractions as they distill from imported crude. On the other hand, the V2 cent a gallon duty on imported fuel-oil ostensibly for the protection of coal is taken advantage of by the oil-refineries to import in effect a large volume of fuel-oil free of duty in the form of crude oil; in short, the tariff provisions appear to have been used to accomplish the direct opposite to that intended. (For fuller details see paragraphs 45 and 46, Chapter XV.) 45. All petroleum products, particularly gasolines, diesel-oils, furnace-oils, stove-oils, lubricating-oils and heavy fuel-oils, should be tested and graded according to the purpose of use and priced and sold by such grades accordingly. 46. The capital structures of the oil companies give an indication of profits in many forms and reserves accumulated throughout the years. Comparing subscribed capital with their present investments, the oil companies have made huge profits in the past twenty years. The dividend ratio over a period of years is not an indication of the profits actually made. 47. The huge outlay in refineries and in wholesale and marketing facilities are in excess of market requirements. Depreciation and other reserves arising thereout, coupled with incidental maintenance and operation costs, adds greatly to the price of products. 48. The fact that oil companies have recently erected refineries in this Province where they can only hope to get a share of an existing market indicates the opportunities for profit under the integrated system. 49. The major oil companies, with probably some slight exceptions, do not function as purely British Columbia companies. They are in effect sales agencies of California corporations. The Imperial's operations in British Columbia are governed to a considerable extent by its contract with the Union Oil of California. 50. British Columbia's supply of and prices of petroleum products depend largely on the type of crude-oil imported and the manner in which it is processed here. Under the integrated system these matters are controlled principally in California by the major oil companies operating there. As constituted, the oil industry by its integrated nature lends itself to monopoly, with control of crude petroleum, products thereof and prices. Profits resulting from British Columbia operations may have no relation to profits or losses shown in British Columbia. It is not in the public interest that products of vital necessity should be controlled as to price and supply in this manner. GENERAL INDEX. Page. INTRODUCTION 1 Sec. 1.—Canada's Position in the Petroleum World 1 Sec. 2.—British Columbia's Position in the Fuel-oil World 3 Sec. 3.—-Amount of Gasoline and Fuel-oil sold in British Columbia 4 Sec. 4.—Oil Companies operating in British Columbia 6 Sec. 5.—Method of Distribution of Gasoline and Explanation of Terms used 7 CHAPTER I.—REVIEW OF COST METHODS OF OIL COMPANIES APPLICABLE TO MARKETING AND DISTRIBUTION WHEREIN IT IS SHOWN THAT THE SYSTEM OF BOOKKEEPING FOLLOWED BY THE OIL COMPANIES FAILS TO REVEAL NET PROFIT AT THE REFINERY AND NET PROFIT OF MARKETING AND DISTRIBUTION, AND THAT CONSEQUENTLY ACTUAL COSTS OF PRODUCTION AT REFINERY, ACTUAL COSTS OF WHOLESALE MARKETING AND DISTRIBUTION, AND ACTUAL COSTS OF RETAIL MARKETING AND DISTRIBUTION ARE NOT REVEALED 9 Sec. 1.—Actual costs are not available 9 Sec. 2.—The Manner in which the Lack of Production of Wholesale Costs by the Oil Companies has been surmounted 13 Sec. 3.—Some Outstanding Difficulties 13 Sec. 4.—Explanation and. Discussion of the Sales Realization Method of computing Costs 13 Sec. 5.—Illustrations to show some Reasons for Rejection of Sales Realization Method 14 (a.) Applied to Transportation of Crude-oil to Refinery 14 (6.) Applied to Investment in and Operation of Service-stations 14 (c.) Use by other Oil Companies 15 (d.) Increase in Gasoline Price thereby Increases Cost 15 (e.) Reasons for Rejection by Tariff Board, Ottawa 16 (/.) Reference to Clarkson Commission, Ontario 17 (g.) Reference to Banking and Commerce Committee Parliamentary Inquiry, 1932 17 (h.) Not used by McColl-Frontenac Oil Co., Ltd . 18 (i.) Actual Cost can be obtained 19 (j.) Analysis of Use of Method by United States Tariff Board and same distinguished 19 (...) Not applicable to British Columbia Conditions and Analysis Text-book Authority thereon 20 (..) Commission's Duty to ascertain Actual Cost of Fuel-oil Negatives Use of the Method 21 (m.) Recent Statement of Oil Industry Leaders repudiates principles upon which the Method is founded 21 (n.) Helps shifting of Losses and Acceptance of Wasteful Expenditures as Proper Costs 22 CHAPTER IL—THE WHOLESALE COST OF THE MARKETING AND DISTRIBUTION OF GASOLINE 23 Sec. 1.—Oil Company Statements based on Sales Realization Method are of no Assistance 23 Sec. 2.—Evidence as to certain Contracts for the Wholesale Distribution of Gasoline from Refinery Door or Importation Point to Service-station, showing the Spread under which it is carried out successfully 25 Sec. 3.—Certain Evidence (other than Contracts) relating to the Wholesale Cost of the Marketing and Distribution of Gasoline from the Refinery Door or Importation Point to Service-station 26 (a.) In Seattle, Washington 26 GENERAL INDEX. Page. CHAPTER IL—Continued. Sec. 3—Continued. (6.) In Buffalo, N.Y 27 (c.) Based on Vancouver Tank-ear Price 27 (d.) Fuel-oil Comparison 27 (e.) Evidence of an Importer 28 (/.) Should not cost more than Two Cents per Gallon 28 (g.) Analysis Imperial Oil Figures 28 (h.) Analysis Shell Oil Figures 29 (i.) Analysis Union Oil Figures 29 (/.) Analysis Home Oil Figures 29 (fc.) Reference to Banking and Commerce Committee Evidence 30 (I.) Grounds for Rejection of Oil Company Statements 30 (ra.) Need for Limitation of Depreciation, Advertising and Sales Promotion Costs, chargeable to Consumer 31 (n.) Further Reference to Banking and Commerce Committee Evidence 31 Sec. 4.—Other Features adding unnecessarily to the Wholesale Cost of marketing and Distributing Gasoline 31 (a.) Duplication of Bulk Storage-stations and Agents 31 (6.) " Free Deliveries " of Gasoline coupled with Direct Sales by Oil Companies to Consumers 32 (c.) " Free Service " 33 (d.) Leasing Service-stations to Operators at Cost or Low Rentals 33 (e.) Expensive Equipment 34 (/.) Frequent Painting of Signs and Service-stations 34 (g.) Accessories 34 (h.) Lighting 34 (i.) Buying Real Estate and erecting Stations and General Observations 34 CHAPTER III.—THE RETAIL COST OF THE MARKETING AND DISTRIBUTION OF GASOLINE 37 Sec. 1.—Evidence concerning Multiplicity and Duplication of Costly Service-stations as the Cause of High Cost of Retail Distribution 37 (a.) Statements of Oil Companies 37 (6.) Statements of City Councils and Public Organizations 37 (c.) Service-station Dealer Statements 37 Sec. 2.-—-Investments of Oil Companies in Service-stations owned, leased and controlled by them 38 Sec. 3.—Number of Service-stations and Dealers 39 Sec. 4.—Gasoline sold through Service-stations 41 Sec. 5.—" Spreads" allowed Retailers operating Company-owned Service-stations or under 100 per cent. Agreement with some Comparisons 43 Sec. 6.—Company-owned Service-stations cannot make Ends meet—Reasons therefor 45 Sec. 7.—Contention of Service-station Operators that they cannot make Ends meet and Reasons therefor 48 (a.) Too Many Service-stations 48 (6.) The " 100 per cent. Agreement" and " Split Accounts " 48 (c.) Additional Price Discounts and Rebates 50 (d.) Sales direct to Consumers by Oil Companies 50 (e.) Oil Companies' Invasion of the Retail Field 50 (/.) " Free Service " and Long Hours 51 (g.) Repair work at Service-stations 51 (h.) Retailers Loss from shrinkage of gasoline 51 (i.) Suggested Method of preventing Shrinkage Losses 52 (j.) Analysis of Representative service-station Dealer's Financial Statements.... 52 (k.) Retailers' spread elsewhere than in British Columbia 52 GENERAL INDEX. Page. CHAPTER III.—Continued. Sec. 8.—Inroads of the Service-station into the Business of the Garage and Automobile Dealer and the Effect thereof 56 Sec. 9.—Summary of Evidence relating to Retail Costs 57 CHAPTER IV.—SALE OF GASOLINE FOR MARINE, FARMING AND LOGGING PURPOSES 59 Sec. 1.-—Gasoline Sales to Fishermen and other Marine Sales 59 Sec. 2.—Gasoline Sales to Farmers and Fruit-growers 61 CHAPTER V—WHY THERE ARE SO MANY SERVICE-STATIONS AND RETAIL GASOLINE OUTLETS AND WHY THE WHOLESALE AND RETAIL COSTS OF MARKETING AND DISTRIBUTION HAVE BECOME " UNREASONABLE " 63 Introduction to Chapter 63 Sec. 1.—Integrated Companies—their Set-up, the Reason for their Existence, and the Dominant Role they play in the Gasoline price Structure 63 Sec. 2.—Oil Company Explanations of the System of Distribution which entails Wasteful Expenditures 65 Sec. 3.—The Wasteful System of Marketing and Distribution results from the Oil Companies finding that the most Effective Way to keep up the Wholesale Price is through keeping up Retail Prices by:— 67 (a.) Fixing and maintaining Retail Prices 67 (6.) Owning and leasing Service-stations 72 (c.) The 100 per cent. Contract 74 (d.) Interference with Continuity of Supply of Gasoline of Retail Dealers who attempt to reduce Retail Prices 74 Sec. 4.—Effect of Iowa Legislation upon the Integrated System as Applied to Service-stations 76 Sec. 5.—Summary of this Chapter 77 CHAPTER VI.—ANALYSIS OF THE GASOLINE PRICE STRUCTURE 79 Introduction to Chapter 79 Sec. 1.—The Tank-wagon Price (Definition Section 5—Introduction) is stated by the Oil Companies to be the Starting Point in any Price or Cost Discussion 79 Sec. 2.—The Vancouver Tank-wagon Price is based on Price at Refinery-door in Mid-Continent Field (Texas, Oklahoma) plus Freight, Duties and other Charges laid down in Vancouver, and is not (as it should be) based on the Cost at.Vancouver of Crude-oil and refining Gasoline and Delivery to Service-stations in Vancouver 79 (a.) Table 23, Comparison Vancouver Tank-wagon Price, 1932, based on Hamilton Price 80 (6.) Table 25, Comparison Vancouver Tank-wagon Price, 1935, based on Mid-Continent Refinery-door Prices 84 (c.) Table 26, Comparison Posted Retail Prices, Canadian and U.S. Cities 87 Sec. 3.—Evidence that Canadian Gasoline Price Structure arrived at by adding the Freight from Mid-Continent Refinery-door plus Duty and other charges, as set out in Tables 23, 24 and 25 above and explained in Section 2 (a), (6) and (c) of this Chapter 88 (a.) Hamilton Example 88 (&.) Halifax Example 89 (c.) Winnipeg Example 89 (d.) Winnipeg-Vancouver Example 89 (e.) Regina Example 90 (/.) Assistant Dominion Appraiser's Evidence _______ 90 (g.) Has there been a Change in Price Structure Policy? 91 (/..) Mr. McCloskey's Statement 91 (i.) Shifting the Rail Freights to Refinery-door Price when expedient 92 GENERAL INDEX. Page. CHAPTER VI.—Continued. Sec. 4.—Comparison of Gasoline Prices in Victoria and Ottawa, with Analyses thereof 93 Sec. 5.—Summary of the Discussions in Sections 2, 3 and 4 of this Chapter 94 Sec. 6.—Price Structure of Gasoline throughout British Columbia 95 (a.) Gasoline Prices in British Columbia Centres on October 31st, 1934; October 21st, 1935; and November 22nd, 1935 96 (6.) Gasoline Prices outside Vancouver are not based on Vancouver Base Price plus Freight from Refinery as alleged 98 (c.) General Remarks thereon 100 Sec. 7.—Some findings of the Tariff Board which explain further the Gasoline Price Structure in British Columbia 101 Sec. 8.—Jobbers' Special Contracts and Principles underlying 104 (a.) Explanation of Imperial Oil, Ltd 104 (6.) Considerations arising thereout 105 (c.) Application and Analysis of Principles underlying above Discussions concerning Prices to Jobbers or Large Purchasers 106 (d.) Certain Results that follow from the Discussions in (a), (b) and (c) of Section 8 of this Chapter 107 Sec. 9.—" Special Prices " and " Discrimination " 107 Sec. 10.—The Result in British Columbia as it affects the Price the Consumer pays for Gasoline and Coal 108 CHAPTER VII.—THE PRICE OF GASOLINE TO THE CONSUMER IS TOO HIGH . 109 Introduction to Chapter 109 -Comparison with Gasoline Prices in the State of Washington 109 -The British Columbia Consumer pays too much for Gasoline considering the Price at which it can be imported and sold here 111 Evidence of Mr. C. C. Labrie 111 Shell Company's Importations in 1931 112 Gasoline from Los Angeles—Domestic and Export Prices 112 Dr. E. R. Lederer on Gasoline Price at Refinery 113 Importations of Gasoline from Seattle 113 -Vancouver Price compared with Montreal, Toronto, Hamilton and Ottawa _ 114 -History of the General Trend of Gasoline Prices in the United States and Canada 1 115 (a.) Graph No. 1—San Francisco Wholesale and Retail Prices, 1911 to 1934 and Remarks thereon 115 (b.) Graph No. 2—Average Price, California Crude-oil, 1911 to 1933 116 (c.) Inferences from the Two Graphs and Factors to be remembered in studying Statistical Data relating to Gasoline and Crude Prices 116 Sec. 5.—Relation of Gasoline and Crude-oil Prices 116 (a.) The Manner in which the Crude-oil Price in relation to Gasoline is arrived at in the United States 117 (6.) Inclusion in Price of Crude-oil of Pipe Line Charges which materially differ from Actual Transportation costs 119 (c.) Interstate Commerce Commission Report on Pipe Line Charges carrying Losses in other Branches 120 (d) Summary of Section 5 120 Sec. 6.—History of Gasoline Prices in British Columbia 121 CHAPTER VIIL—EVIDENCE RELATING TO ATTEMPTED REMEDIES AND SUGGESTIONS MADE TO THE COMMISSION FOR IMPROVEMENT 125 Sec. 1.—Appeals to City Councils 125 Sec. 2.—Efforts made by Oil Companies 125 Sec. 3.—Remedies suggested to the Commission 125 Sec. 4.—The Necessity for the Grading of Gasoline 126 Sec. 1.- Sec. 2.- (a.) (b.) (c) (d.) (e.) Sec. 3.- Sec. 4.- GENERAL INDEX. CHAPTER VIIL—Continued. PAGE' Sec. 5.—Some General Suggestions made during the Course of the Commission 127 (a.) Uniform price of Gasoline throughout British Columbia 127 (6.) Meter on Tank-wagons 128 (c.) Provincial Tax and Shrinkage Loss and Gasoline used in Testing Motors 128 (d.) Gasoline Sales by General Merchants 128 (e.) Repairs by Unskilled Mechanics 128 (/.) Sales of Gasoline direct from Wholesaler to Consumer : 128 CHAPTER IX.—THE PRODUCTION, TRANSPORTATION AND PREPARATION FOR USE IN BRITISH COLUMBIA OF CRUDE PETROLEUM AND ITS PRODUCTS 129 Sec. 1.—Hydro-carbons—their Nature and Characteristics as they affect Gasoline, Fuel-oil and other Petroleum Products, and the refining and suitability thereof for Use 129 (a.) Hydro-carbons 129 (6.) Natural or "Blending" Gasoline 129 (c.) How the characteristics of the Hydro-carbons affect the Refining of Gasoline 130 (1.) Straightrun Distillation 130 (2.) " Engineknocking " 130 (3.) Difference between Straight Chain and Cyclic Hydro-carbons 130 (d.) The Reasons for Cracking 133 (e.) Gasoline Requirements of To-day 133 (/.) How Fuel-oils are affected by the influence of Hydro-carbon Characteristics upon Gasoline 134 (g.) Diesel-oil 134 (h.) Light Fuel-oils 134 (i.) Heavy Fuel-oil 134 Sec. 2.—No Crude-oil is produced in British Columbia 135 (a.) Refineries in the Province 135 (6.) Petroleum Product Importations 136 (c.) Short Reference to Crude-oil Handling 136 (d.) Considerations in Purchase of Crude-oil 136 (e.) Fuel-oil Market developed in British Columbia 136 (/.) Reasons for Purchase of California Crude-oil 137 (g.) Posted Crude-oil Prices at Well and Gravities 137 (h.) Availability of Gasoline Crudes 138 (i.) Blending and Mixing of Crudes 138 (j.) Influence of Gravity on Price, etc 139 (fc.) Gravity means Little Commercially 140 (I.) Gravity is not the most Significant Factor 140 (m.) No Regular Relationship between Gravity and Cost 141 (n.) Relation A.P.I, and Gasoline Content 141 Sec. 3.—Production of Crude-oil 141 Sec. 4.—Pipe Lines _•_ 142 Sec. 5.—Transportation of Crude-oil to British Columbia—Tankers 142 Sec. 6.—Methods of Refining 143 (a.) General Principles involved in Refining Process 143 (6.) Further References thereon 144 (c.) Several Ways of producing Gasoline used in the Province 145 (d.) Use of " Casinghead " Gasoline 146 (e.) Instance of much Lower Gasoline Recovery than Evidence Indicates 147 (/.) Tethra-ethyllead 147 Sec. 7.—Production of Gasoline in British Columbia, 1934 148 Sec. 8.—Costing Methods of Oil Companies 148 (a.) Citation of Dominion Tariff Board Evidence 148 (6.) Costs of Production furnished are of no help to the Commission 150 (c.) Essential Factors in ascertaining Cost 150 GENERAL INDEX. PAGE. CHAPTER IX.—Continued. Sec. 9.—Cost of Production of Crude-oil at Well 151 Sec. 10.—Pipe Line Charges in relation to their Costs 159 Sec. 11.—Remarks upon Costing Methods in the Light of Crude-oil Prices and Pipe Line Charges 159 CHAPTER X.—THE PRODUCTION AND CONSUMPTION OF PETROLEUM PRODUCTS IN BRITISH COLUMBIA AND THE DOMINANT ROLE OF HEAVY FUEL-OIL 161 Sec. 1.—Refineries 161 Sec. 2.—Crude-oil and Casinghead Importations into the Province in 1934 162 Sec. 3.—Sales of all Petroleum Products by Companies owning Refineries in the Province in 1934 163 Sec. 4.—Petroleum Products produced in the Province in 1934 164 Sec. 5.—Gasoline Imports, Production and Total Sales in 1934 discussed 167 Sec. 6.—Casinghead or Natural Gasoline Importations compiled from Company Records 167 Sec. 7.—Fuel-oil Imports Production and Total Sales in 1934 discussed 167 (a.) Comparison of Total Fuel-oil Production and Imports with Total Sales 167 (6.) 20,379,514 gallons of Fuel-oil unaccounted for 167 (c.) Certain other Fuel-oil Discrepancies and Difference in Fuel-oil Gallonage upon which Provincial Tax " waived and rebated " 167 Sec. 8.—Fuel-oil Gallonage Totals in the light of Exemptions from Customs Duty and Provincial Tax 168 (a.) Imports in Bond 168 (b.) Discussion, Tax-exempt Fuel-oil Gallonage 168 (c.) "Waived and Rebated" Clause in "Fuel-oil Tax Act" 168 (c_.) Apparent Loss of Revenue through Fuel-oil Exemptions 169 Sec. 9.—Kerosene 169 Sec. 10.—Lubrieating-oils 170 Sec. 11.—Greases 171 Sec. 12.—Percentage Recoveries of Products in Various Refineries 172 ' Sec. 13.—Tables showing Fuel-oil Used in British Columbia compared with other Provinces 173 (a.) Petroleum Fuels marketed in Canada by Provinces, Table 52 174 (6.) Comparative Summary of Fuel-oil Deliveries by Provinces, Table 53 175 (c.) Specific Use of Fuel-oil by Provinces, Table 54 176 (d.) Detail of Fuel-oil delivered for Domestic Heating, Table 55 177 (e.) Canadian Railway Consumption of Fuel-oil for all Purposes, Table 56 178 (/.) Fuel-oil Delivered for Rail and Water Transportation, Table 57 179 (g.) Kerosene Deliveries, Table 58 179 (h.) Gasoline Consumption by Provinces, Table 59 180 (t.) Remarks thereon 181 Sec. 14.—Evidence References showing that Fuel-oil Market in British Columbia determines the Type of Crude-oil imported and the Manner in which it is refined, and that the Gasoline-recovery is not the Dominating Consideration as in Refineries elsewhere in Canada 181 Sec. 15.—Gasoline and Fuel-oil Production in Canada by Areas 184 CHAPTER XL—FUEL-OIL PRICES IN BRITISH COLUMBIA 185 Sec. 1.—Heavy Fuel-oil " Posted " Prices 185 (a.) Heavy Fuel-oil Posted Prices in United States, Table 61 186 (6.) Heavy Fuel-oil Posted Prices in British Columbia and Canada, Table 62.___ 188 Sec. 2.—Contract Prices Igg Sec. 3.—Comparison of " Posted " and Contract Prices 187 Sec. 4.—British Columbia Heavy Fuel-oil Contract Prices are too low compared with California Prices Igg GENERAL INDEX. xxi. Page. CHAPTER XL--Continued. Sec. 5.—If the price of heavy Fuel-oil in this Province was not kept near its importation price from Seattle and California, the sale of heavy Fuel-oil produced here would be jeopardized 189 Sec. 6.—Light Fuel-oil Prices 190 (a.) Diesel-oil Prices 190 (6.) Furnace-oil Prices 190 Sec. 7.—Reason Heavy Fuel-oil Prices are so low in British Columbia 191 Sec. 8.—The Leading Vendors of Heavy Fuel-oil 192 Sec. 9.—Summary of this Chapter 193 CHAPTER XII.—THE COST OF PRODUCTION OF GASOLINE AND FUEL-OILS IN BRITISH COLUMBIA 195 Sec. 1.—Essentials for Consideration 195 Sec. 2.—Imported Crude-oil and the Manner of processing same, in View of Heavy Fuel-oil being the Main Objective 195 (e».) Discussion of Gravity of Imported Crudes 195 (6.) Blending of Crudes 196 (c.) Type of Crude and Method of refining based on Market to be supplied 197 (d.) Cost of all Major Refined Products approximately the same 197 (e.) Necessity for Adequate Distinction between Low Gravity Crude and Fuel-oil 197 (/.) Tariff Provisions taken Advantage of to import Fuel-oil indirectly in the Form of Fuel-oil Crudes 197 Sec. 3.—Cost of Gasoline increased by Importation of Fuel-oil Crudes 198 (a.) Adding Blending Gasoline to Gasoline Fractions of Fuel-oil Crudes 198 (6.) Fuel-oil Production Costs may be " loaded " on Gasoline 198 (c.) Blending Gasoline costs more in California than Commercial Motor-gasoline 198 (...) California Blending-gasoline Production 199 (e.) Effect of Tariff Change in May, 1936, encouraging Production of Heavy Fuel-oil 199 (/.) Practical Working of Tariff Provisions shows their Objects defeated 199 (g.) Tariff Provisions tend to increase Cost of Gasoline Production 200 Sec. 4.—Reasons Actual Costs of Production from Well to Product are not available 200 Sec. 5.—Results of Non-production of Actual Costs of Crude-oil at Well, Pipe Lines and Water Transportation 200 (a.) As to Well Prices 200 (&.) As to Pipe Line Charges 201 (c.) As to Water Transportation 201 (d.) Summary of this Section 201 Sec. 6.—Reference to Processing Costs in British Columbia 201 Sec. 7.—Reference to Costs of Gasoline, Fuel-oil and other Petroleum Products in British Columbia by Straightrun Distillation 201 Sec. 8.—The Apparent Cost of Gasoline, Heavy Fuel-oil, Light Fuel-oil and other Petroleum Products as disclosed by Analytical Tables 202 Sec. 9.—Comparative Results from a Barrel of Crude-oil based upon (a) Gasoline and Heavy Fuel-oil Costs of 4.96 Cents and 3.95 Cents per Gallon respectively, compared with (6) Gasoline and Heavy Fuel-oil Costs of 4.14 Cents respectively, when applied against Gasoline and Heavy Fuel-oil Refinery-door Prices of 10.47 and 2.51 Cents per Gallon respectively; the Crude-oil being processed to obtain Gasoline-recoveries of 34.02, 18.87 and 25 per Cent, respectively, and Explanation of Figures and Terms used 204 (a.) Results from a Barrel of Crude-oil with 34.02 per Cent. Gasoline-recovery without the Addition of Casinghead, showing a Profit of 42.0595 Cents per Barrel, Table 73 205 (&.) Results from a Barrel of Crude-oil with 18.87 per Cent. Gasoline-recovery, with Addition of 28 per Cent. Casinghead, showing a Profit of 14.9810 Cents per Barrel, Table 74 207 GENERAL INDEX. CHAPTER XII.—Continued. page. Sec. 9—Continued. (c.) Results from a Barrel of Crude with 25 per Cent. Gasoline-recovery, with Addition of 28 per Cent. Casinghead, showing a Profit of 29.8922 Cents per Barrel, Table 75 208 (d.) Object of these Tables 209 (e.) Results shown by Tables 73, 74 and 75 209 Sec. 10.—Comparative Result from a Barrel of Crude-oil based upon (a) Gasoline and Heavy Fuel-oil Costs of 4.96 Cents and 3.95 Cents per Gallon respectively, compared to (6) Gasoline and Heavy Fuel-oil Costs of 4.14 Cents per Gallon respectively, applied against Gasoline and Heavy Fuel-oil Refinery-door Prices of 17 Cents and 2.51 Cents per Gallon respectively; the Crude-oil being processed to obtain Gasoline-recoveries of 34.02, 18.87 and 25 per Cent, respectively 210 (a.) Results from a Barrel of Crude with 34.02 per Cent. Gasoline-recovery without the Addition of Casinghead, showing a Profit of 119.8122 Cents per Barrel, Table 76 211 (6.) Results from a Barrel of Crude-oil with 18.87 per Cent. Gasoline-recovery without Addition of 28 per Cent. Casinghead, showing a Profit of 58.1084 Cents per Barrel, Table 77 212 (c.) Results from a Barrel of Crude with 25 per Cent. Gasoline-recovery with Addition of 28 per Cent. Casinghead, showing a Profit of 87.0297 Cents per Barrel, Table 78 213 Sec. 11.—The Results of a 13.80 per Cent. Gasoline-recovery compared with 18.87 and 25 per Cent. Recovery in Previous Tables, Table 79 214 Sec. 12.—Comparative Results from a Barrel of Crude-oil based upon (a) Gasoline and Heavy Fuel-oil Costs of 4.96 Cents and 3.95 Cents per Gallon respectively, compared with (6) Gasoline and Heavy Fuel-oil Costs of 4.14 Cents per Gallon respectively, applied against Gasoline and Heavy Fuel-oil Refinery-door Prices of 10.47 Cents and 4.71 Cents respectively; the Crude-oil being processed to obtain Gasoline-recoveries of 34.02, 18.87 and 25 per Cent, respectively 215 (a.) Results from a Barrel of Crude with 34.02 per Cent, recovery without the Addition of Casinghead, showing a Profit of 87.8129 Cents per Barrel, Table 80 217 (6.) Results from a Barrel of Crude with 18.87 per Cent Gasoline-recovery with Addition of 28 per Cent. Casinghead, showing a Profit of 67.6413 Cents per Barrel, Table 81 218 (c.) Results from a Barrel of Crude-oil with 25 per Cent. Gasoline-recovery with Addition of 28 per Cent. Casinghead, showing a Profit of 77.8324 Cents per Barrel, Table 82 219 Sec. 13.—Summary of Tables 73 to 82 220 Sec. 14.—Conclusions from Sections 8 to 13 of this Chapter 220 (a.) Application of said Tables 220 (6.) Results disclosed by said Tables 221 (c.) Cost of Gasoline Production in the Light of said Tables 221 (d.) Further Discussion thereon 222 (e.) Cost of Heavy Fuel-oil Production in the Light of said Tables 222 Sec. 15.—Further Comparison of the Methods of Refining, indicating Additional Costs incurred by Use of Casinghead 222 Sec. 16.—Evidence of Cost of Gasoline elsewhere 223 (a.) Evidence of Dr. E. R. Lederer, of New York 223 (6.) Reference to Cost of Importation as indicative of Cost elsewhere 224 (c.) Shell Oil Montreal Importations, 1931 224 (d.) Maple Leaf Oil and Refining Co., Coutts, Alberta 224 (e.) Discussion, Expenditures relation to Costs 224 (/.) Confirmation of Gasoline Cost arrived at in Cost Tables 224 Sec. 17.—Summary of previous Discussions 224 GENERAL INDEX. xxiii. Page. CHAPTER XIII.—IMPORTATION OF PETROLEUM PRODUCTS AND CONDITIONS WHICH AFFECT SAME, INCLUDING DUMPING DUTY 227 Sec. 1.—Importation of Petroleum Products 227 (a.) Importation of Gasoline 227 (6.) Importation of Heavy Fuel-oil 227 (c.) Importation of Diesel-oil 227 (d.) Importation of Kerosene and Lubricating-oils 227 Sec. 2.—Reasons Gasoline is not imported into Province in Competitive Volume 228 Sec. 3.—The Dumping Duty—what it is 228 Sec. 4.—Does the Dumping Duty exist? 228 Sec. 5.—Fair Market Value 230 Sec. 6.—Dumping Duty Statutory Provisions 231 Sec. 7.—Effect of Dumping Duty before the Amendment of Section 36 in 1930 232 Sec. 8.—Effect of Dumping Duty Amendments in September, 1930, and since 234 Sec. 9.—The Dumping Duty as interpreted can be successfully evaded by Integrated Companies 235 Sec. 10.—The Dumping Duty has not been applied to Heavy Fuel-oil 235 CHAPTER XIV—THE EARNINGS OF OIL-REFINING COMPANIES IN BRITISH COLUMBIA IN RELATION TO THE CAPITAL ACTUALLY EMPLOYED AND THE CAPITAL STRUCTURE OF SUCH COMPANIES 237 Sec. 1.—Some Preliminary Considerations 237 (