by: Dan Leger
In the summer of 2006, the Nova Scotia government instituted a policy it didn’t believe in, knew wouldn’t work and which would do the opposite of what people thought it would do. That was gasoline price regulation, which many consumers believed would keep costs down but hasn’t and which government thought would dull public discontent, which it doesn’t.
The five-year regulation folly is an excellent example of knee-jerk politics in the face of problems beyond the reach of local government. It’s what happens when torch-wielding villagers circle Province House demanding action. They don’t burn down the manor house anymore. Now, they flood it with email.
Politicians know the villagers will vote and influence others, so they toss them a bone. In this case, the bone was regulation.
Yet even when regulation was first introduced, a senior official told me, the cabinet of the day knew it wouldn’t lower prices. Philosophically, the Conservatives didn’t like regulation and the message it sends to markets. But politically, there wasn’t much they could do. They were besieged.
Gas prices had risen stratospherically along with the price of oil. Global factors were in play: unstable world politics, demand growth in China and India, and speculation by market traders. The ham-fisted bumblers of the Bush administration kept stirring the geopolitical waters, Asian economies were flourishing and the guys in the red suspenders were making out like bandits on commodities exchanges around the world.
And here in little Nova Scotia, government was powerless to affect any of that. Individual consumers and businesses paid through the nose. Prices doubled in the three years leading up to the public-perception crisis that panicked the Tory government into adopting regulation.
So the John Hamm-Rodney MacDonald Tories knew that regulation made no sense then, and Darrell Dexter probably sees it makes no more sense now. Regulation has become a burden to two governments that has done nothing to reduce prices or calm consumer discontent.
In July of 2006 as regulation came into force, regular unleaded was going for $1.13 a litre in Halifax. Now, almost five years later, it’s about $1.25, after the sudden reduction last week. So it might have evened out the bumps, but it hasn’t lowered prices.
And since the government adds in its costs, regulation actually makes gas more expensive. The government charges wholesalers .09 cents per litre to administer the program. Since Nova Scotians consume about 1.2 billion litres of gasoline each year, they’re paying $1.08 million more at the pumps each year just to administer the regulation they demanded.
Regulation also creates a time lag in periods of falling prices before regulated minimums are set each week, and that has cost consumers millions more. The Atlantic Institute for Market Studies estimates that across our region, consumers have paid $155 million more than if gasoline markets had remained unregulated.
Granted, part of the rationale for regulation was to protect small-town and rural gas stations, which it has done to some degree. Since 2006, fewer rural gas stations closed down here than in New Brunswick, which is a comparable sized regulated market subject to the same global market forces as ours.
But with Asian demand still strong and prices on the rise, consumer rage has roared back to life. Prices are up, so we’re mad at Big Oil, at big government, at the refiners and at the speculators. But we also should look at ourselves.
Nova Scotians still drive more than almost all other Canadians, on average more than 18,000 kilometres per year. Our biggest city still encourages sprawl into the suburbs, while doing too little to promote public transportation. We still drive in traffic to Bayers Lake or Dartmouth Crossing to buy socks.
So while government profits from taxes on high gas prices and keeps regulating, we Nova Scotians cling to our wasteful ways. We prefer to splurge on expensive energy, as long as we can keep complaining. But there are alternatives: drive less, use public transit, encourage urban density, stop the sprawl. Can we just think of that, the next time we need socks?