Oil Prices. BDO Dunwoody Weekly CEO/Business Leader Poll by COMPAS in the Financial Post for Publication May 7, 2007

Transcription

1 BDO Dunwoody Weekly CEO/Business Leader Poll by COMPAS in the Financial Post for Publication May 7, 2007 COMPAS Inc. Public Opinion and Customer Research May 4, 2007

2 1.0. Concise Summary Canada s business leaders believe that the current high prices of oil are not justified. At the same time, business leaders are relatively unchanged in their concern over the affect of oil prices on the economy. The majority of Canadian CEOs and business leaders say the oil situation today is better than it was during the oil crisis in the mid to late 70 s. On balance, respondents to this business panel favour reducing taxes on the purchase of fuel efficient cars, investing in public transit, and cutting fuel taxes at the pumps as a means to diminish the economic impact of rising oil prices. On most of this issues, the views of the panel have changed very little over the years. These are the key findings from the past week s web survey of the COMPAS CEO and business leader panel undertaken for The Financial Post under sponsorship of BDO Dunwoody LLP Questions and Answers The tables below list questions and answers. In some instances, the questions have been tracked over the years. (Q6) To what extent are the current high prices on the part of oil companies justified? Please respond using a 7-point scale where 7 means completely justified and 1, the opposite

3 (Q1) As you may know, prices at the pump have recently hit significant highs. Do you think the current situation is much better, somewhat better, somewhat worse, or much worse than the oil crisis in the mid to late 70s? [ROTATE POLES] May 2007 April 2005 May 2004 Much better Somewhat better Somewhat worse Much worse DNK/Refused (Q2) Using a 7 point scale where 7 means a significant negative impact and 1, the opposite, to what extent has the recent rise in oil prices impacted [ROTATE] Industry May April The economy in general May April Consumer spending May April (Q3) Using a 7 point scale where 7 means definitely should and 1, the opposite, to what extent should the Government support oil exploration through tax support? May April

4 (Q4) Using a 7 point scale where 7 means a strongly compelling reason and 1, the opposite, please score each of the following possible reasons for or against Government subsidized oil exploration in Canada: [RANDOMIZE] Oil will remain central to the economy May April There are more important priorities for Government spending than oil exploration May April Strong North American and worldwide economies will mean continued increased demand for oil and therefore a return on any oil exploration investment May April Overseas oil supplies can not be counted on May April The immense size of Canada s oil reserves should be realized May April Continuing moves towards fuel efficiency will result in reduced demand for oil in the future May April

5 (Q5) On a 7 point agree-disagree scale where 7 means agree a lot, please score each of the following opinions about what governments should do [RANDOMIZE] Cut taxes on the purchase of fuel efficient vehicles May April May Increase subsidies to transit systems May April May Stop applying taxes above a certain price per gallon, for example above 85 cents a litre May April May Leave gas taxes alone as a way of cutting fossil fuel emissions May April May Cut taxes on gas and raise taxes on new gas guzzling automobiles May April May Permanently cut taxes on gas and look for other sources of government revenue May

6 April May Do nothing because the problem will stabilize or go away May April May Verbatim (Comments from Respondents) Respondent Verbatim In general, any government reaction to a perceived problem may provide temporary alleviation but will almost inevitably produce worse results in the long run. Made in Canada oil pricing. I don't feel that our cost of energy should be driven by the world price. We have plenty of energy, and we should take advantage of this by having a Made in Canada price. This would help develop home-grown industry, which could better compete in world markets. The market is being pre-conditioned for $1.15/L gas prices. Oil profits are obscene given that the oil companies have made little investment in refining in the last years. Consumers are conditioned to the fact that Big Oil has a validsounding reason 365 days per year as to the price increases but are lock-jawed when prices are or should be heading south. Despite the strong temptations otherwise, government intervention and subsidies in a free-market economy is generally wrong in the long term, and reducing taxes, any taxes, is generally the right thing to do most of the time. The same applies here. In a balanced and open (i.e., free/fair trade) economy, the market will supply its own solutions (e.g., if oil becomes uneconomical through present sources of supply) then the market will find new sources of supply. Can someone explain why gas goes up 5 cents but comes down by fractions of a cent? It only makes sense that it goes up and down by the same amount. Oil supplies per se are not the root of the problem, it's refining capacity. The irony is that in rationing supply, which is really what is happening, the oil companies guarantee their profit margin and don't really share the burden of the problem. Intuitively that's not helping to fix the problem. 5

7 Respondent Verbatim Oil companies are gouging. They have skimped on investment to create artificial shortages. They are the only industry that can change its price 5 times a day. The price of gas should be regulated as an essential item, such as milk. Oil reserves have never been higher. Experts say that the problem is the demand; that is, we can't suck the oil out of the ground fast enough. The solution has to be either more extraction plants and more pollution, or increased investment into real alternative energy sources. The auto industry still controls a large component of the Canadian economy, and oil drives the auto industry. It is in our best interest to insure that the public is able to, continues to, and can afford to purchase autos. Tax relief at the pumps would help the average Canadian support the consumer driven economy, and it would be a win/win scenario for the public and corporations. Just a note: as the price of gas goes up, the federal revenue derived from the GST on the price just keeps adding the federal coffers allowing for the tax relief. A lot more work and research needs be done regarding alternative energy sources. The whole system of world price for oil needs a national revision. Canada supplies as much oil to the US as Saudi Arabia, but we pay more for gas than the US. We need a national oil price policy, not a world price. No politician has the guts to pursue such a policy for the good of the country, except of course the late Mr Trudeau! We need massive government support of alternative energy sources, more importantly than the current attention on carbon fuel economy. As usual, we see government, press and the general population insufficiently informed to head in the important directions we must go. Governments should take the gas taxes that they have coming in now, and fund research into alternative energy sources in order to get us off the oil pipeline. There are many reasons for high gas prices. However, I have no doubt that oil companies in Canada are taking opportunistic advantage of this situation, and rip their customers off while our incompetent official authorities do nothing! Gas prices are artificially set. Prices rise when tourist season starts and drop when it ends. It s profit-taking at its finest. Without sacrificing oil exploration, the government should also be looking at developing alternate energy sources. The reason for doing both simultaneously is the length of time required to transition from existing oil-dependent energy sources to alternate energy sources. This will take a long time and be a slow process. Gas tax caps are a GREAT idea, no matter the rise at the pump. 6

8 Respondent Verbatim We can move to higher taxes on large-engine passenger vehicles to encourage the purchase of more fuel-efficient vehicles, but the government shouldn't make any fast moves to radically change the tax structure on oil and gas. Prices are set based on worldwide events, and any Canadian government policy that tries to intervene will likely cause unanticipated problems. We are supposedly in a free market economy, and we should be charging the polluters for the privilege of polluting. The polluters are not the corporations producing product. In a supply/demand economy, the polluters are the consumers: the DEMAND side, No demand, no pollution. Hit the demand side and see how "green" we really are. More or less, tax policy should be designed to efficiently raise enough money to run the government efficiently and cover the transfer payments that a civil compassionate society feels are needed to look after the less fortunate. Efficiently raising money means a tax policy that encourages economic growth, and job creation as a healthy economy will provide the best overall outcome. The market can take care of the rest of the allocation of resources in the efficient manner it normally will without regulatory interference. As an owner of a small growing business I do not consider tax policy efficient. My growth is strongly curtailed by a tax policy that takes my profit, which could and should be reinvested in the business in the form of R&D or capital expenditure. I am forced to borrow money to pay taxes as I spend money for capital expenditures immediately and get the write off in the future. My ability to personally guarantee the loans from other assets limits my borrowing and hence growth. A 100 percent write off in the first year would allow me to grow much faster, employ more people and become a source of greater profit sooner, which would over the longer term provide greater tax contributions to support the system Methodology The COMPAS web-survey of CEOs and leaders of small, medium, and large corporations was conducted May 2-4, Respondents constitute an essentially hand-picked panel with a higher numerical representation of small and medium-sized firms. Because of the small population of CEOs and business leaders from which the sample was drawn, the study can be considered more accurate than comparably sized general public studies. In studies of the general public, surveys of 147 are deemed accurate to within approximate 8.1 percentage points 19 times out of 20. The principal and co-investigator on this study are Conrad Winn, Ph.D. and Tamara Gottlieb. 7