July 20, 2006

Gas Price Regulation and the 'N Word'

Gas regulation and the N word
Nationalization is supported by many Canadians: poll

With oil prices gushing above $70 a barrel, it's hard to imagine anyone in the fuel industry is going broke.

But, on July 11, around 90 gas stations across New Brunswick shut off the pumps and turned away motorists for a half day to protest the provincial government's regulation of gas prices: some fuel station owners say regulations, which came into effect July 1, can make turning a profit impossible.

"I think that (more protests) will be evaluated on a day by day basis," said Kevin McCann, New Brunswick sales manager for Wilson Fuel Co. Ltd.

"If the purchase price allows us to make money we'll sell fuel. If we can't make money, we won't sell fuel and that event happens on a daily basis." Under the government's regulation scheme, gas prices are set by the Public Utilities Board every two weeks. When the initial protests took place, the regulated price was $1.124 per litre, with an extra two cents per litre allowed for transportation costs.

The New York Harbor base price, the main international trading value of oil, changes daily because of: perceived demand, geopolitics, consumption levels and other factors. When the international price rises, New Brunswick gas station owners say they cannot make a profit if they have to sell at a regulated rate below what they think is the proper market price.

Contrary to popular belief, the purpose of regulation isn't to lower fuel prices, it's to provide stability. "The main thing we want from price regulation is to take the major daily swings out of daily pricing, which can get especially bad in the summer driving season," said Marc Belliveau, spokesperson for the department of energy.

"My issue is that there has been little communication between government and retailers," said Jeff Wright, owner of Wright Esso in Woodstock.

"When people come into my station, they often wonder why the price is $1.14 per litre rather than the rate of $1.12. The government didn't communicate properly with consumers about the extra money which could be added to the price because of transportation and that leaves some people wondering." But really, regulation at the provincial level is much-a-do about nothing.

"Regulation affects the price between where we buy from the St. John refinery to the pump price," said Kevin McCann. "They're (government) controlling 7.7 cents of the purchase price and that fluctuates day by day.

"It's pennies," said McCann.

"Owners of oil in Saudi Arabia or Texas or Alberta have lots of people who want their product.

The thought that tiny New Brunswick or P.E.I.

or Nova Scotia could beat up the oil companies and make them accept our local price - Or Else - would be hilarious if it weren't so pathetic," wrote Brian Lee Crowley, executive director of the Atlantic Institute for Market Studies, a right-wing think tank.

Opposition to current regulation policy may be one of the few issues this author and Mr. Crowley agree on.

However, that doesn't mean we have to roll over and accept the relentless profiteering of big oil.

If government really wants to lower gasoline prices for consumers, an objective which would be good for the economy and bad for the environment, there are serious options beyond the trite bureaucratic bungling of provincial regulation.

One option, supported by 49 per cent of Canadians and 53 per cent of Atlantic Canadians, according to 2005 Ledger Marketing polls for Canadian Press, is nationalization: the 'N word' for big business.

It is a scary thought: all Canadians, not just a hand full of uber-profitable corporations, owning the natural wealth below our soil.

Exxon-Mobile, the world's largest oil firm and - not coincidentally - the planet's most profitable company, sucked up $36.13 billion in 2005 profit.

Do they really deserve that much?

If we are serious about taking on big oil and reducing prices, Canada does have some cards to play: we're currently America's number one oil supplier.

Politically stable Canadian oil is a resource lusted after by countries across the world and they'd no doubt be willing to buy it and even invest in development if we nationalized.

Populist governments in South America, most notably Bolivia and Venezula, have taken the road of nationalization and can finally use oil wealth to help the poor rather than just foreign and domestic elites.

Moreover, nationalizing our black gold would have economic benefits far beyond oil itself. Canada's dollar has risen sharply recently, in part because of demand for our oil and other non-renewable natural resources.

To buy Canadian oil, or invest in Canadian oil fields, other countries have to buy Canadian dollars, which causes the value of the dollar to rise.

The rising dollar is hurting New Brunswick's forest industry, tourism and central Canada's manufacturing.

If we collectively controlled the amount of oil we sold, we'd have a better ability to control the dollar to protect exports.

No politicians, in New Brunswick or elsewhere, have the gumption to mention the 'N word', but a debate about it would at least be more interesting than the hoopla around current regulations which quibble over pennies and pass petrol problems to small station owners who don't deserve to be squeezed.

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