09 February 2009

The smear of schmeergelder

When former New Brunswick gas regulator David Nelson couldn’t impugn a think tank report that shows – as drivers know – that gas price regulations costs them more than the unregulated system, the only thing Nelson could offer up is the suggestion the think tank is on the take.

That’s as convincing as the defence offered by local licenses and permits minister of Kevin O’Brien who took issue with the AIMS report that drivers in Newfoundland and Labrador had shelled out $65 million extra due to gas price regulation.

O’Brien said the amount couldn’t be that high because the regulatory office only costs $500K a year and that is paid by the gas retailers. 

Yes.  A cabinet minister responsible in part for looking after consumers doesn’t understand that when they pay more than they should have, that’s a cost.

But anyway…

CBC gives way too much credit to Nelson’s smear. They add their own observations at the end of the piece:

Also, the Calgary petroleum consulting firm MJ Ervin reported in its 60-city national survey that five of the 10 lowest pump prices recorded in 2008 [not including taxes] were in New Brunswick or Nova Scotia. Halifax gas prices ranked fourth lowest in the country.

One tiny problem:

Pump prices include taxes.

Check those on the MJ Ervin study and you find the ten lowest prices are in western Canada and parts of Ontario.



herringchoker said...

Except that taxes have nothing to do with regulation, they are paid regardless of whether or not gasoline prices are regulated. They are, in effect, a measure of how much governments think they can bleed from consumers with them realizing it.

That being the case, the only proper way to compare prices across jurisdictions (as provincial taxes vary) is to measure them on an extax basis. Happily enough MJ Ervin does this as well(http://tinyurl.com/cy6t4x). Sorry if it undermines your argument Ed.

George said...

Here's yet another link. Take special note of the "ex tax" price of heating oils, the cheapest in Canada, no less!

Where are we on gasoline?...Somewhere around the middle from the looks of the list. While I agree with you that taxes are a huge component, it's not like we haven't said something about getting some taxes removed in the interests of giving the consumer a break and returning disposable income back to the consumer.
The real reality of this report was obvious:that, if Big Oil thought we were overcharged by a penny or so, they could drop the price themselves. They also negated to mention the fact that regulation here in the province, regulates the maximum allowable, and that companies are free to charge anywhere below that. Problem with the loss in competition here is that they never do compete for market share now.
I still think that the AIMS study is tainted and I would love to see a 'neutral' position on the issue.

Edward G. Hollett said...


You and I will likely never agree on this but what it comes down to is really simple:

Consumers in this province pay more for gas under a regulated system than they would under the free market.

That's an entirely unnecessary cost.

All the reasons given for bringing in the system didn't pan out. The system doesn't save consumers a nickel; it costs them money. It doesn't really protect them from price changes, it just slows then down slightly.

The real beneficiaries of this system are the retailers. They no longer have to worry about competition. No company will sell below the maximum price when they can sell the maximum and collect extra profit. There is no competitive incentive. The system you favour takes away the very thing that delivered consumers the real break.

They know exactly what they can charge for gas. They know exactly how much profit they will make and - as a result of the way the system is set up - they get protection from price drops and the difference between their cost price and the retail market (the whole business of cleaning out expensive inventories).

The system is closed. Their returns are guaranteed. I'd venture the extra cash in the system is flowing to them.

The other big winner is the public treasury.

Where in that system is there any incentive to cut anything and give consumers a break? Government won't cut taxes. retailers don't want the system changed because it gives them control of the market. People can call for government to cut gas and gas-related taxes taxes but those are the last taxes they'll cut.

The AIMS study isn't tainted. It lays it out in black and white. There hasn't been a substantive criticism of the report yet.

That's because there can't be one.

Regulation doesn't work. It costs consumers money.

We successfully resisted calls for this until government finally gave in - in a weak moment - and now we will likely never get rid of it.

We certainly can't get rid of it as long as people refuse to look at a study that shows the system is costly.

Bennie said...

Ed doesn't have an argument and AIMS is, as usual, is off the mark.

Edward G. Hollett said...

Careful there Bennie.

AIMS is the place where the whole Equalization clawback thing started.

Some people around here might try and lynch you for that heresy.

Anonymous said...

Eddie has a very short memory or he hasn't be driving for very long.

No surprise to the see this blog lining up with big oil though. No suprise. How much work have you been doing for them Eddie? You are as bad a AIMS. Selling out the province for a few "consulting" bucks. Pretty sad. Glad you aren't still in gov't and giving it all away for nothing.

Edward G. Hollett said...

Thanks Anonymous 1737 for proving my prediction correct: the usual gang of local sock puppets will come forward to aggressively target any opinion that doesn't fit their agenda.

And hey, we are bringing back the old favourite set of smears they trotted out two years ago.

Lies then. Lies now.

But hey, if you didn't have lies - and you had some guts - you'd actually sign your name to your comments.