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Gas puzzler

Editorial by Kyle Shaw


Imagine a big glass of beer. No, bigger. This thing is a litre, about three bottles worth of beer. Can you see all that delicious amber liquid, bubbles dancing to the top, the glass breaking out in a cold sweat, sitting on the table in front of you on a hot July day? Now how much would you pay for that beer? Maybe five or even 10 bucks, but since we’re dealing with the realm of imagination, let’s go lower. Not three bucks, not two. Let’s says it’s a dollar and eight cents. Would you be happy paying $1.08 for that litre of beer? So happy that it wouldn’t matter if the next one cost $1.19, and the one after that cost $1.03? That’s right. As long as they keep serving, you’ll be fucking ecstatic.

But if we swap that beer for a litre of gasoline, there may be trouble. The average Nova Scotian loves to freak out over gas prices, and the average media outlet loves to join the frenzy. It’s a routine that’s been going on for years. A typical Herald headline from 1985, when gas hit 55.7 cents: “N.S. gasoline prices up 342 per cent since ’71.” Lately, gas has caused enough concern that premier Rodney MacDonald brought regulation out of its 15-year retirement, imposing government-approved prices at the pumps on Saturday, July 1. Friday night I passed up $1.09 gas that the free market offered, and got it for $1.15 on Sunday, a change that left me feeling something other than ecstasy.

Regulation has lots of problems, but the big one is that it won’t make gas cheaper. There’s a long road between oil buried in the ground and the gas for sale at your local station, and everyone along the way takes a cut. Most of your buck-and-change is taken by the powerful oil producers and cartels, who do quite well for themselves—a barrel of crude cost less than $10 in New York in 1998, and this week North Korea’s missile tests were blamed for pushing the price to $75.

Another big chunk goes to the provincial and federal tax collectors. A small sliver is split locally between the wholesaler (who drives the gas from the Imperial refinery in Dartmouth to the individual gas stations) and the retailer (who runs the station). This slice of wholesale and retail margin is what regulation controls, and it’s not an influential part of the price.

Rodney MacDonald could cut provincial taxes on gas as he just did on home heating oil, except that would lose the province a lot of money. Instead he creates bureaucratic work that will ultimately cost gas consumers $1.1 million to set up, in order to look like he’s doing something about gas prices. Think about that big glass of beer again: Regulation deals with the foam at the top.

To his credit, MacDonald doesn’t say regulation will bring low prices. He talks about “stability” for drivers and rural gas stations. The rural stations are a whole other story: They’ve been closing in large part because their customers are moving away to urban areas, and besides, a gas company executive explained to me, most rural stations have been earning more than they’re promised under regulation. As for drivers, they can rest assured the price won’t change much, if at all, during each two-week regulatory period.

But is the average driver that concerned about stable prices? If so, two weeks of a single price won’t do much to settle those fragile nerves. The price is still going to jump around 26 times a year. For longer-term stability, MacDonald could set the price at $1.50. Or to help us more, $2.00 per litre guaranteed into 2008, peace of mind that only money can buy.

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