¹ The difficulties of determining the cost of production, some of them peculiar to the oil industry, others to all industries exploiting an exhaustible resource, cannot be discussed here.

² Page references in the text are to the Commission's report as published by Imperial Oil Limited.

³ Stocking, G. W., Oil and the Competitive System (Boston, 1925).Google Scholar

⁴ Pogue, J. E., Economics of the Petroleum Industry (New York, 1939), p. 19.Google Scholar

⁵ Ibid. In the province of Alberta the Petroleum and Natural Gas Conservation Board, created by the Oil and Gas Resources Conservation Act (1938), deals with all matters pertaining to conservation and proration.

⁶ It is true that either of these proposals would introduce difficulties with respect to “motives” for the exploration of new oil fields but such difficulties should not prove insurmountable.

⁷ Dr. John W. Frey, an associate director of the Petroleum Conservation Division under the Secretary of the Interior in the United States Government, was, in many important respects, the principal expert witness appearing before the Commission.

⁸ Vice-President of the Imperial Oil Limited.

⁹ Chamberlin, E. H., The Theory of Monopolistic Competition (Boston, Harvard University Press, 1933), p. 10.Google Scholar

¹⁰ Imperial Oil Limited uses approximately one-half of the total field production of the Turner Valley (Report, p. 66).

¹¹ Prior to 1938 the British American Company operated a refinery at Coutts, Alberta, and also a small skimming plant at Calgary through its subsidiary the Bell Refining Company, Limited. During 1938 these two refineries were not operated except during the season of peak demand, the refining for the British American Company being done by Imperial Oil Limited.

¹² Dr. G. G. Brown, Professor of Chemical Engineering at the University of Michigan.

¹³ To the reviewer it seems that, in a federal system with a multiplicity of taxing authorities, if we hope to make meaningful comparisons of rates of return we should use the profit figures as they stand before subtraction of income taxes.

¹⁴ “We accept Dr. Brown as a truthful and competent witness and so in the light of his evidence as to what is a reasonable rate of return on capital investment in a refinery business… it seems to us that unless we are to set ourselves up as experts in such matters, which, as we see it, we are neither competent to do nor called upon to do, we must come to the conclusion that the rate of return enjoyed by Imperial Oil Limited on its refinery operation is not an unreasonable one” (p. 101).

¹⁵ Reynolds, L. G., The Control of Competition in Canada (Boston, Harvard University Press, 1940), p. 60.CrossRefGoogle Scholar

¹⁶ In 1938, Imperial Oil Limited, British American Oil Limited, North Star Oil Limited, and Canadian Oil Companies Limited marketed about 60 per cent of the total volume and, since these companies followed the same general scheme of operations, the marketing methods adopted by them may be said to be the marketing methods which are typical for Alberta.

¹⁷ As Imperial Oil Limited does not segregate, in its records, the operations of its marketing department from its other operations, the Commission took the prices used in its refinery analysis and used them as a refinery door purchase price for the marketing department. This served to show what the performance would have been had the Imperial marketing branch been obliged to buy its products on the same basis as the jobbers.

¹⁸ Or 10.57 per cent after the deduction of income tax.

¹⁹ Actually the Commission considered a rate of return of only 7.56 per cent. This figure was arrived at by calculating what the 1938 earnings would have been had the 1939 tank wagon prices of motor fuels been in effect in 1938. It seems rather ridiculous to base a decision as to the “reasonableness” of a return on assumed prices for a given year. Surely, if the price of motor fuels were reduced there would be increased sales which would affect the “per unit” marketing costs, gross receipts, and profits!

²⁰ No doubt the Commission was correct in assuming that quite the opposite conclusion was expected, and in fact the Commission itself stated, “… granting that there are too many service stations, which we think is the case …” (Report, p. 136, italics mine).

²¹ The Commission stated that “if duplication in service stations is affecting the tank wagon price, it is doing so through the effect of this expense account on the returns of the wholesalers” (Report, p. 135).

²² Imperial Oil Limited charges farmers the posted price for motor fuel, delivered on the premises of the farmer in barrels or delivered to the farmer at the bulk station (Report, p. 141).

²³ Canada, House of Commons, Standing Committee on Banking and Commerce, Minutes of the Investigation into the Manufacture and Sale of Gasoline (1932), p. 233.Google Scholar

²⁴ Tariff Board of Canada, Reference Number 84, Petroleum Products (1935), p. 143.Google Scholar

²⁵ Province of British Columbia, Royal Commission on Coal and Petroleum Products, Vol. I, Report of the Commissioner, the Son. Justice M. A. Macdonald, relating to the Petroleum Industry …; Vol. II, Report of the Commissioner …, relating to the Coal Industry … (Victoria, King's Printer, 1937), p. 238.Google Scholar See also review of the report by E. A. Forsey in this Journal, May, 1939, 225-8.

²⁶ Standing Committee on Banking and Commerce, Minutes of Investigation, p. 198 Google Scholar, quoted in Dorrance, G. S., The Price of Gasoline in Canada (Master's thesis, Queen's University, Kingston, 1941, unpublished), p. 100.Google Scholar

²⁷ Macdonald Commission, Report, p. 69.

²⁸ See the Report, p. 161. From the economic point of view the arguments advanced are completely unconvincing.

²⁹ For a more complete exposition of the economic issues involved in resale price maintenance see: Curtis, C. A., “An Economic Analysis of Resale Price Maintenance in the Canadian Tobacco Industry,” Annex III of Investigation into an Alleged Combine in the Distribution of Tobacco Products in the Province of Alberta and Elsewhere in Canada, Report of the Commissioner (Ottawa, King's Printer, 1938).Google Scholar See also review of the report by G. A. Elliott in this Journal, May, 1939, pp. 216-19.

³⁰ Chamberlin, The Theory of Monopolistic Competition, passim.

³¹ McColl-Frontenac Oil Company Ltd., 1939 Report.

³² See in this connection, Reynolds, , Control of Competition in Canada, pp. 192–3Google Scholar, and Dorrance, , Price of Gasoline in Canada, pp. 126–8.Google Scholar

³³ The reviewer is fully aware of the difficulties in the path of legislative price-fixing and suggests this only as an alternative to “restoring” competition in the industry.

³⁴ Dorrance, , Price of Gasoline in Canada, p. 150.Google Scholar

³⁵ With the exception of Professor G. A. Elliott of the University of Alberta who presented a memorandum on taxation of motor fuels.