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Editorial: Burned at the pump

Published on August 25, 2017

Gas pump

©File photo

All four Atlantic provinces have price controls on gas, but government regulations have actually increased the cost.

At least, that’s the assertion being made in an Atlantic Institute for Market Studies (AIMS) policy paper, which suggests consumers pay millions extra because of those regulations.

AIMS compares costs under controls versus a free market system, but does not offer a reason as to why Atlantic governments would want to be partly to blame for higher gas costs for consumers, when the primary reason behind controls is to protect consumers.

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 amounts and provincial sales taxes.

The sales tax applied by Newfoundland and Labrador, for example, is more than double the amount in New Brunswick and Nova Scotia.

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

The key reasons behind controls were to ensure price stability and preserve the 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 pumps even with controls, and often motorists from small communities must travel to larger communities for cheaper gas.

AIMS doesn’t slam governments, suggesting that high prices are not the result of a conspiracy or ill intent, while at the same time arguing that controls needlessly manipulate market prices.

Would it be overly cynical to suggest that while assuring Atlantic Canadians controls provide a safety buffer, governments secretly prefer higher prices so provincial coffers fill up with tax revenue?

AIMS suggests 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, totalling over $200 million. The study estimates motorists have paid in more than 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 and 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.

The Atlantic provinces should review their respective systems of gasoline price regulation and consider updating, streamlining, correcting or abolishing them.

Clearly, things aren’t working as is — at least not for consumers.