I used to live in Nova Scotia for a long time. I remember about 10 years ago, gas in that province wasn’t regulated. It was basically whatever the gas station wanted to charge, according to what they paid for their fuel, and while still remaining competitive.
The drawback to that system of open market was that you could fill up one day and the very next day the price pumps could drop without warning. You never knew what they price of gas (or diesel) would be until you pulled up to the pumps. Imagine the chaos! Put in gas and the next day you could have saved three bucks!
The market at that time was around 60 or 75 cents per litre. And then the calls came from the public, that the “unpredictability” of prices needed to be stopped. People wanted regulation.
Government regulation meant that the Public Utilities Board would take over the pricing of fuel for all of the province. It sounded like a great idea. No more sudden changes without being made aware of it beforehand. No more uncertainty. No more loss of a few bucks once a week or two.
I remember also being a staunch opponent of regulating the market. I hated the idea for one simple reason.
No more drops.
When the market is controlled by the province, then it essentially becomes a provincial body. I know the gas stations aren’t owned by the province, but hear me out.
They are required to set their price range within the limitations set by an entity that has no real power in their industry, other than what was given to them. The gas stations don’t buy their gas and diesel from the Province of Newfoundland and Labrador. They buy it from the same place they always did – suppliers. (Think Exxon or Shell or Irving’s, depending on where you live.)
But the government is telling them what they can charge and what they can pay for it. So the prices will always be in the high end of the recommended range. Because the government makes more, the more fuel costs.
We all know that there are a jerry can full of taxes on a litre of gas. But do you really know how much tax?
Here is the breakdown on a single litre:
• 14.5 cents per litre provincial gas tax
• 8.84 cents per litre carbon tax
• 12.4 cents per litre provincial sales tax
• 10 cents per litre federal excise tax
• 6.2 cents per litre federal sales tax
• 4.7 cents per litre of tax on tax.
So for one litre of gas, costing me 2.08 this morning, I am paying 56.65 cents of taxes. That means my gas is 1.51.
The discrepancy is astounding.
And the whole intent of gas regulation was to get rid of unpredictability. But with over 20 “Interrupter Clause” invocations in the last 5 weeks, are we really experiencing anything different than what we had without government regulation? The volatility is still there. But now the province jumps the prices 16 cents, and the next days decides to drop it 3 cents. So the little drop is the only thing we recall. Or so they hope.
Long gone are the days of a fun day of gas wars between stations, where they keep dropping their prices to empty their tanks before a new delivery – 1.00, 95 cents, 80 cents. (Those were the days.) Imagine if they tried that now. 2.08. 2.079. 2.076.
With that volatility of the market, the only way we can count of getting our gas prices down is to completely eliminate fuel regulation. Let the gas stations set their prices back to what is an equitable market rate, and remove government oversight on this industry.
Do we have government regulated prices on lumber, car sales, newspaper sales? No, of course not, because these are free markets in a free economy.
But we didn’t like being surprised every couple of days, so now we are in a regulated market for private industry. Until we demand change don’t expect it, so let me ask you this – when’s the last time the government actively decided to make less money on something as lucrative as the fuel tax?