11 May 2007 wlach   » (Master)

Gas price gouging

Just read through the study that the Canadian Centre for Policy Alternatives published on "gas price gouging". As usual, the blamed party is the oil companies, who apparently are pricing gasoline in excess of the cost of production. What's missing in the report is any analysis of SUPPLY. You don't need to be an energy economist to realize that people will consume more of a commodity if the price goes down. The world is consuming pretty much all of global oil production right now, this stuff is available on a global market, so what other signal can the market give to Canadians to moderate their use of oil other than increasing the price? Shortages?

Ok, so maybe you're a bit of a socialist (as I am) and think that the government should sometimes step in to regulate a market. We have a good amount of the resource right here in Canada, so we could just keep more for ourselves, right? This principle was put into practice with regard to energy in the 1980 with the National Energy Program. Mechanisms were put into place to restrict oil exports to the United States and the rest of the world and force depressed prices here in Canada. Eastern Canada got cheap gasoline at a steep economic cost to Western Canada. More than twenty years later, the NEP is still bitterly remembered in Calgary (capital of Alberta, Canada's oil-rich Western Province). Do we really want to go back there again?

I don't think so, but that's not really the point. There are clearly much bigger issues here beyond the prices people pay at the pump and "greedy oil companies" (the needless dependance of Canada's primarily urban population on the automobile being the big one). When are we going to get a decent public discussion going in Canada on energy issues?

Syndicated 2007-05-11 19:10:41 from wlach

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