Price bracket or straitjacket?
Published Thursday October 9th, 2008
Consumers are wondering why fuel prices in New Brunswick haven't fallen as quickly as those in other jurisdictions as the price of oil has gone down. It's a reasonable question, and it deserves an answer from government.
The slow decline in gas prices is a consequence legislators could have predicted when they made regulation a priority. Rules that cushion drivers from spikes in the global market also ensure that prices fall more slowly here than in unregulated provinces.
Legislators must look at the results, listen to consumers, and decide whether regulation serves the public interest.
The policy was billed as a way to prevent price shock. In pegging the regulated price to the stock market and reassessing it once a week, all government has managed to do is slow the fluctuations down.
As oil rose to record highs, New Brunswick's pump prices followed - not always as quickly as prices in neighbouring provinces, but just as surely. And, over time, consumers began to notice the same tell-tale patterns that had sparked complaints of unfair pricing in the first place. If fuel prices go up the week after a major holiday, instead of the week before, does it make a meaningful difference to consumers?
Regulation has produced some paradoxical situations. New Brunswick drivers have seen pump prices climb while the price of oil itself fell, thanks to heavy speculation in the gasoline market. Prices spiked ahead of Hurricane Kyle as Gulf Coast refineries shut down, triggering New Brunswick's interruption clause; yet the cost of a litre of fuel dropped back much more slowly, because the downward change in the market price wasn't enough on a daily basis to trigger the same dramatic intervention.
Post-hurricane complaints about high prices have spurred Energy Minister Jack Keir's department to review whether the regulatory regime is working. Legislators need to look at the big picture: What has the overall impact of the policy been, how well is it serving consumers, and what has been the experience in other provinces during the same period of time?
The Liberals promised to scrap gas price regulation during the 2006 election campaign, but relented as gas prices rose. It's now 2008, the price of oil is falling, and there's plenty of data by which the program can be judged.
It's time to assess the results and deliver a verdict.
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Comments (2)
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Yes prices don't rise or fall as quickly as other areas but I knew the price would drop today so didn't buy yesterday. I wish I had that luxury in other areas.
The simple fact is our population isn't large enough to force the price down through compitition. Profits can't be made up on volume.
If anyone out there believes that the price wouldn't rise immediatlly and significantly upon the demise of regulation...well...I've got this Harbour Bridge for sale...
As for those calling for the free market to reign consider the source and look at the state of the financial news.
If you check the historical charts on gasbuddy.com, you'll see something interesting: our gas prices were consistently above the national average prior to regulation and consistently below the national average ever since.
A quick check of today's provincial average prices shows that we're currently paying 2.6 cents less per litre than Alberta!
Hmmm, we're paying among the lowest price in the country and less than oil-rich Alberta so the only people against regulation must be for the oil companies. Remind me again - who owns the Telegraph?