The steep price of gas stability

IT SHOULDN’T surprise anyone that regulating gasoline prices in Nova Scotia is expensive.

Even a government-funded study last fall indicated that Nova Scotia drivers pay about $6 million a year more under regulation than when the market was determining the price.

On top of that, it costs almost $1 million a year for bureaucrats to administer the program.

Now the Atlantic Institute for Market Studies has come out with its own study, and starting Monday it is continually — second by second — calculating the cost of regulating gas prices.

On Monday afternoon, the calculator on the AIMS website showed that regulation had cost Nova Scotia drivers about $17.9 million since it went into effect on July 1, 2006.

While the government glibly writes off AIMS’s criticisms as right-wing ideology, it cannot argue with the facts.

When the government’s own study of regulation was released in November, Jamie Muir, who was then the minister of Service Nova Scotia, indicated that regulation was generally meeting the government’s goals of price stability and protecting rural retailers.

“We are going to continue with regulation, yes, until somebody establishes it’s not good for Nova Scotians,” Muir told reporters at the time.

The AIMS study, written by research manager Bobby O’Keefe, uses the government’s own estimate of the cost of regulation, 0.51 cents a litre, in making its calculations. And that’s before taxes, he points out.

O’Keefe says that for every extra dollar drivers pay for gas, governments in Atlantic Canada get a bonus of 13 to 15.5 cents. That means there is an additional cost to consumers of 0.58 cents a litre in Nova Scotia.

While critics of AIMS will point out that several oil companies are helping to fund the organization, the fact is that oil companies are the biggest beneficiaries of regulation because they don’t have to worry about being undercut by competitors and because the government’s calculations include a profit margin in the regulated price.

Regulation usually lags behind market conditions. The government can change the regulated price more often if the market price increases or decreases dramatically, but it is generally set each Friday morning.

The market price has been in decline for a while, so it could be argued that Nova Scotia drivers have been paying more than necessary.

I’ll admit that people have become accustomed to the price of gas changing just once a week, but it seems we’re paying a steep price for stability. And critics point out that the number of times the price has changed under regulation isn’t much different from the number under the old market system.

Regulation is also supposed to keep gas stations in rural areas competitive with their urban counterparts, thereby allowing more rural stations to stay open.

Considering that much of the Tory power base is in rural Nova Scotia, it isn’t likely the government will drop regulation this close to the next provincial election, expected to be called in the spring.