by Bobby O’Keefe

The government keeps telling us that gas regulation is working. But their own consultants tell us we are consistently paying more for gas then if it was unregulated, that the cost of regulation is going to increase over time, that rural retailers are still going to close, and that only the government is really coming out ahead.

Does that sound like it is working to you?

When the government launched regulation, it stated three primary goals – stabilize prices, keep struggling retailers in business, and minimize the cost of regulation to consumers. Note this doesn’t say “lower prices for consumers” anywhere. It says price stability at greater cost.

Now it might appear as though we can save money through the predictability of price changes. Wait until Thursday to hear what people are predicting the Friday price change will be and shop accordingly. If the price is expected to rise, get to the gas station. If it’s going down, sit tight. Money saved, right?

In actual fact, no, it isn’t. No matter how the price changes any particular week, the price we pay, Thursday or Friday, is, on average over time, about half a cent more per litre than the cost without regulation. Nova Scotia consumers have paid almost $15 million more for gasoline because of regulation since it came into effect in 2006.

Add to that the fact that the $15 million doesn’t include the extra HST we have to pay on that extra half a cent per litre. As a direct result of regulation, the government has taken an extra two million dollars in HST from our pockets. Unfortunately, I can’t take solace in the fact that regulation is helping plump up the government’s bottom line.

I also can’t take solace in the fact that rural gas prices are now routinely higher than prices in Halifax . That is right, rural retailers trying to survive have lost ground on their Metro colleagues. Gardner Pinfold’s analysis is quite clear, New Glasgow’s prices for example, were consistently two to four cents a litre below prices in Halifax before regulation. Now, motorists in New Glasgow are paying two cents more. Truro, Kentville, Sydney, and Yarmouth are all now worse off price-wise, relative to Halifax, than prior to regulation.

So people in rural areas whose gas stations need saving are properly paying the price to save their local operators right? Again, wrong. On first glance, the number of retailers closing has slowed, and some retailers have opened or re-opened in rural areas since regulation started. While the rate of retailers closing slowed after regulation was introduced, trends in other markets show closures were slowing anyway. Fewer retailers were closing because retailers that weren’t profitable were already gone. On top of that Gardner Pinfold themselves admit that, “Regulation does not provide margins high enough to save all low-volume rural stations”. Translation – marginal retailers are likely to close with or without regulation in place.

Sadly, the report’s recommendations for the future of regulation will only make us pay more for achieving less. First, retailers’ costs have risen since regulation began. These costs, such as labour and transportation of fuel to the retailer, are intended to be covered by regulation’s fixed retailer margin and transportation allowances. The review found that margins and allowances aren’t adequate to cover actual costs, so both should be increased. Remember that half a cent per litre more we’re paying? Get ready for that to go up.

Second, many retailers sweetened their promotions and discounts under regulation to attract more customers – a few cents a litre at Wilson’s for paying cash, discounts from grocery store retailers, and discounts on gas for grocery purchases. According to the Gardner Pinfold review, these promotions and discounts, all of which directly benefit you and me, apparently “undermine the viability of independent dealers”. Consumer beware, those coupons you’ve been saving up could soon be worthless.

Lastly, cost conscious consumers who religiously check the media every Thursday to see what’s going to happen to the price on Friday will need to be more vigilant and perhaps even clairvoyant to get their preferred price for the next fill-up. The review’s recommended changes to the “interrupter” clause mean it will be used more often than under current rules. So one of the highlighted “positives” of regulation is fewer price changes, yet recommendations for improvements will result in more price changes.

In response to the review, the Minister responsible for regulation stated “We are going to continue with regulation, yes, until somebody establishes it’s not good for Nova Scotians.” So far, we’ve got higher prices for every city, town, and village, more money for the government, and no guarantee of saving access for rural populations. How much worse does this need to be for Nova Scotians?

Bobby O’Keefe is a Senior Policy Analyst with the Atlantic Institute for Market Studies in Halifax.