Gas Prices Affected By More Than Regulation
NOTE: The following is an op-ed piece by Dale Madill, senior policy advisor, Service Nova Scotia and Municipal Relations.
The debate over gasoline regulation has been ongoing for years.
No matter what side of the debate you are on one thing hasn't changed: for the last 20 years the price of gasoline has risen steadily during the summer driving season (from Victoria Day to Labour Day).
These price increases are often compounded by outside forces that also drive the cost of oil. War in the Middle East, weather-related events and galloping economic growth in China -- all affect the price of gasoline here in Nova Scotia.
Consumers may not realize it, but over the last month the price of gasoline in Nova Scotia has actually been below the competitive global market price. That is because the New York Harbor price has continued to increase even after the regulated price has been set -- eating up the margins that retailers need to operate.
And hard-hit retailers -- many of them small business operators who are key employers in our communities -- are not the only local link in the supply chain.
The interests of wholesalers and refiners and transportation costs must also be considered. Commuters also rely on the revenues generated by gas taxes to maintain and improve the ferries, bridges, and highways we all travel on.
Still, the largest factor in the price of gas is the growing global demand, especially in North America. As our demands increase, the costs for manufacturing, heating and cooling our homes, or gas for our cars has skyrocketed.
That's happening again in 2006 and no government or law -- including regulation -- can change that. What government can try to do is provide more stability and predictability for consumers and retailers.
Consumers have told us they want stability so prices don't jump up and down every second day, sometimes for seemingly no reason at all. Consumers want to know they are being treated fairly and that the price -- even if they don't like it -- is justified.
Many of us also continue to want convenience. The idea of driving 20 kilometres to buy gas isn't acceptable for a senior citizen, or in winter driving conditions. This means making sure retailers get a deal that makes it worthwhile for them to keep operating.
Taking all these factors into account, and recognizing there is no end in sight to the volatility of gas pricing, Nova Scotia has opted for greater stability through regulation.
No policy can magically deliver lower prices or guarantee that gas stations will be able to operate if consumers pass them by. That is why the province has committed to a review of the regulation system in six months.
Like all good policies, regulation is designed to balance many competing public needs, including price stability, convenience and consumer confidence. They all have a value and a cost.
None of us likes the price of gasoline, but Nova Scotia can't isolate itself from global events or the economic realities of supply and demand.
Even without regulation there is no question that the cost of gas would have gone up over the last two weeks. Oil companies would have increased pump prices to recover losses from a rising market just as they did in the past.
Because of regulation, consumers have not been subjected to price fluctuations within the industry and there has been no daily scramble for the cheapest price at the gas pumps.
Under regulation, retailers also have better protection from the losses from rising markets, about four cents-per-litre over the last month, that put many small operators at risk of going out of businesses.
Long-term trends will determine if regulation has provided stability for consumers and a fair return for retailers.
Whether it's a new car, or the cost of the gasoline you put in the tank, it usually takes more than 30 days to decide if something new is working the way it should.