Protection or burden?

Apolicy paper released last week makes a convincing argument that government regulations have actually increased the cost of gasoline for Atlantic Canadians. All four provinces have price controls on gas and the Atlantic Institute for Market Studies (AIMS) argues that consumers pay millions in extra costs because of those regulations.

A topic that AIMS avoided is why governments appear content to accept high gas prices, when the primary reason behind controls is to protect consumers. AIMS provided data comparing costs under controls versus a free market system, but never offered a reason why Atlantic governments appear duplicitous in maintaining higher gas costs.

A litre of gasoline in Atlantic Canada is heavily taxed, at an average of 26 per cent. For every $1 of price-regulated fuel, 55 cents goes to the provincial or federal government. There is a common base price for gasoline from suppliers, plus a common federal excise tax. Prices vary because of differing HST totals and provincial sales taxes. The sales tax applied by Newfoundland and Labrador is more than double the amount in New Brunswick and Nova Scotia.

Basic arithmetic suggests that governments rake in more tax revenue off higher gas prices.

Key reasons behind controls were to ensure price stability and preserve availability of gas in rural areas. Lower prices are never mentioned or guaranteed.

Protecting rural gas stations has largely failed. Rural areas have lost many of their gas stations even with controls, and motorists from small communities must travel to larger communities to get cheaper gas.

AIMS is lenient on government, suggesting that high prices are not directly the result of a conspiracy or ill intent, but at the same time, it argues that controls needlessly manipulate market prices. Would we be so cynical as to suggest, that while assuring Atlantic Canadians that controls provide a safety buffer, governments secretly prefer to see higher prices so provincial coffers fill up with tax revenue?

AIMS suggests that motorists in Nova Scotia pay up to 2.5 cents a litre extra because of regulation. In the other Atlantic provinces, the amounts are smaller, but there is a significant overall burden, totaling more than $200 million.

The study estimated motorists have paid in excess of an extra $36 million in Nova Scotia since 2006; $15 million in New Brunswick since 2006; $63 million in Newfoundland and Labrador since 2001; and $91 million in Prince Edward Island since 1991.

The information put forward by AIMS is compelling. It certainly raises questions about the effectiveness of price controls – if indeed they are in place for the protection of motorists or for the taxation benefits of provincial governments.

Atlantic Canadians should be aware of suggestions that they are paying a major price for a minor benefit and that gasoline price controls are a likely burden for motorists.

The four Atlantic Provinces should review their respective systems of gasoline price regulations with views to updating, streamlining, correcting or abolishing them.