"They effectively have a monopoly in the sector, a very small number of very large companies that are setting the prices," he charges.

Now, before we get too deep into this, let me remind you, fellow taxpayers, that unlike you and me, Jack travels in a government car and gets a hefty mileage allowance.

But he has definitely nailed the issue that's likely to be front and centre in the next federal election campaign - rocketing gas prices - because even if you're psychic there's no let up in sight.

And those soaring gas prices will soon start driving up the cost of just about everything else we buy in order to stay alive, keep a roof over our heads, and the kids in shoes that cost two or three times the price of a barrel of crude.

However, I did a little investigating on my own and discovered that based on loonie-a-litre gas, about 35 cents represents the cost of the crude itself, 38 cents goes to federal/provincial taxes and royalties, about 10.5 cents goes to the refiner, 5.2 cents to the dealer, leaving about 10-12 cents for the oil companies.

In 1995 - as a deficit reduction measure - Ottawa increased the federal gasoline tax from 8.5 to 10 cents per litre. The deficit was vanquished seven years ago, but the tax remains.

In fact, Ottawa collects a 10 cents-a-litre gasoline excise tax and then, on top of that, levies the 7 per cent GST. This "double taxation" helps produce a windfall for Ottawa as pump prices rise.

It's not hard to imagine the mood of hard-pressed motorists as they contemplate the fact that, over the past seven years, the federal government has recorded budget surpluses totalling $61.4 billion. And that the latest budget figures — for the fiscal year that ended March 31 — will probably show another surplus that's $4 billion or $5 billion more than forecast by Finance Minister Ralph Goodale. Which should keep Smiling Jack smiling. He can again look forward to prying a few hundred million more in future budget goodies out of the Liberals as payment for helping keep the next Liberal minority in power.

Consumers, however, will find no joy in Goodale's claims that there's nothing Ottawa can do about high gas costs because any gas tax cuts would just be swallowed up by the oil companies.

But look on the bright side - the bigger the federal surplus, the better chance taxpayers have of eventually seeing some of it go into better health, education, environment and infrastructure programs. Maybe - but I wouldn't hold my breath - some tax breaks, too.

Now, just in case some of you are still thinking of lynching the guy who runs your local gas station, you'd better take a few minutes to read the following eye-opener by Canadian Press reporter Tara Perkins. Remember...knowledge is power!

Toronto — Many customers are fuming at gas stations now that the average price of gasoline has topped $1 per litre.

But as station owners expand their price signs to three digits, they are quick to point out that much of the consumer anger is being misdirected.

While the price of crude oil soars towards $70 US a barrel – and producers in the oil patch pop champagne – gasoline sellers are not much better off, says Michael Ervin, the president of Calgary-based consultants MJ Ervin & Associates.

"Despite the fact that we're seeing record-high gasoline prices, the amount of (profit) margin at the marketing level is no different now than it ever has been in the past several years," said Mr. Ervin, an industry analyst who tracks fuel prices nationally every week.

"These higher prices simply represent their passing along of their own higher (costs)."

Canadian Tire Corp., a major auto parts and hardware retailer that has been expanding its gas-station network, said this month that it squeezed only $100,000 in pre-tax profits out of its petroleum division in the spring quarter ended June 30.

Mike Medline, executive vice-president of the retailer which has about 250 gas stations, told analysts that profit margins – the difference between the wholesale price that stations pay refiners for fuel and the price they charge customers – are weak in some of Canada's biggest markets.

"Montreal and Toronto are very difficult places to be doing business in petroleum right now," Mr. Medline said. "Even in these times, I know we didn't make much money, but we made a little money."

The wholesale, or rack, prices that refiners charge marketers for gasoline are determined much like other commodities on international markets and are influenced largely by the price of crude oil, Mr. Ervin said. "For the last month, we've been seeing wholesale prices rise almost on a daily basis."

"Every day that the retailer does not respond to that higher price, they are biting the bullet because their margin is being squeezed. And then, all of a sudden, we see the price go up by 5 cents per litre because of some dealer crying uncle and raising the price. And that leads others to follow suit."

While crude oil prices have been skyrocketing, gasoline retail margins have remained "very much in line with historical margins," he adds, "and those, in a market like Toronto, are in the order of maybe 3.8 to five cents per litre."

Mr. Ervin said Toronto tends to be a lower-margin market because a typical gas station in the city sells about eight million litres a year, compared with smaller cities such as Ottawa or Halifax, where a station would sell five or six million litres.

The more gas a station pumps out, the lower its operating cost per litre. That means it can keep prices lower to compete with nearby stations, he explains.

Last week, the average price in Toronto was 100.7 cents per litre for regular, while drivers in Vancouver were paying 108.5 cents, in Ottawa 102.2 cents, in Halifax 112.9 cents and in Calgary 95.4 cents a litre.

"The margins certainly have gotten tighter in Calgary in the past couple of years," Mr. Ervin said, "primarily as a result of the fact there is a high percentage of non-traditional marketers, or big-box marketers, selling gasoline. It's become more competitive. We've been seeing gas stations close as a result of the tighter margins here."

While gas stations close or have their profit margins squeezed, the picture is only slightly better at the next rung in the chain, the refineries, which buy crude oil from producers and turn it into gasoline.

"I think it's fair to say the refining industry has been on the losing end in terms of return on capital," Mr. Ervin said. "It, historically, has not been a profitable business."

More recently, the refineries have been operating at close to 100 per cent capacity, he said, "and with that, they're finally seeing some reasonably healthy margins on an annual average basis."

Imperial Oil said profits from its petroleum division were $64-million for the second quarter, down from $108-million during the same period in 2004. The latest quarter ended June 30, just as oil prices were topping $60 (U.S). Although refining margins were stronger, "retail margins continue to remain depressed," Imperial said.

Rival Petro-Canada said "higher crude prices and intense competition lowered marketing margins in the downstream business," for the quarter. The company posted earnings of $89-million for refining and marketing, compared with a profit of $92-million one year earlier.

- Of the $4.5-billion collected in federal gasoline and diesel taxes in 2004-2005, Ottawa returned a paltry 7.2% or $324-million back in provincial transfers for road and highway development. In addition, Ottawa collected $1.198-billion in gasoline GST revenues.

-From May 2004 to April 2005 the average cost of a litre of gasoline paid by Canadian motorists was approximately 84 cents. Taxes account for an average 38% of the pump price.

- GST is charged on the full pump price, gasoline taxes included. It is a tax on tax. For every 10 cent increase in the price of gasoline, Ottawa's GST revenues rise by $175-million.

- As a deficit reduction measure in 1995, Ottawa increased the federal gasoline tax from 8.5 to 10 cents per litre. The deficit was vanquished seven years ago, but the tax remains.