Want Lower Gas Prices? Stop Driving

By David Shipley
Telegraph-Journal

MONCTON – Encouraging people to use less gas, rather than trying to regulate prices, is the best way for the province to help ease the pain at the pump, says the industry association representing major oil companies in Canada.

Carol Montreuil, vice-president of the Canadian Petroleum Products Institute said the province needs to focus more on getting people to drive less and conserve more.

It’s not something one would expect to hear from the oil industry.

“People are surprised when I talk about what we call demand-side management or conservation as something that even we as an industry are promoting,” he said.

Encouraging energy conservation is important to the oil industry as it struggles to meet demand, he said.

“Given the lead time that it takes to build refineries, pipelines, we cannot currently keep up with demand at the rate at which it is developing. So initiatives to curb this demand, to control the demand side, is something we wholly support.”

Oil companies need time to develop new oil sources as well as refining capacity in order to bring prices closer to what they were five or six years ago, he said.

Gas-price regulation helps limit price fluctuations, but does so at a higher cost, he said.

Montreuil will be in Halifax this morning to talk about trends in the oil and gasoline markets as well as on gas-price regulation.

The speech is being sponsored by the Atlantic Institute for Market Studies, a not-for-profit Halifax-based think tank.

It takes place two and a half weeks after the provincial governments in New Brunswick and Nova Scotia implemented regulated gas prices amid cries from constituents about the rapidly rising cost of fuel.

Since its introduction on July 1, gas-price regulation in New Brunswick has pitted the province against independent gas wholesalers and smaller retailers who say they can’t run their businesses profitably under the regime.

More than 80 gas stations shut down in protest earlier this month, with the industry claiming the regulated price didn’t allow enough of a margin for wholesalers and retailers.

The province’s regulated gas-price policy sets a maximum price of 11 cents above the New York Harbor average. Retailers can also add up to two cents per litre for transportation costs. The transportation fee can rise to five cents in Grand Manan.

The provincial Liberal Opposition has called on the province to establish clear benchmarks to determine whether gas-price regulation is working.

While regulation is off to a tumultuous start in New Brunswick, Nova Scotia did not experience the same growing pains.

Its gas price policy provides a margin of up to 11.5 cents a litre above the New York Harbor price.

Nova Scotia also allows dealers to add a transportation cost of between 0.3 cents and two cents a litre, but the province factors it into its maximum and minimum price for six different geographical zones.

Gas prices are determined by complex local, continental and global factors, said Montreuil.

Among the major factors is the disappearance of excess oil capacity of several million barrels of oil per day because of strong demand from developing countries as well as continued high demand from North America.

“With this excess or spare capacity disappearing we are now in a mode where we cannot allow, we cannot afford a crisis like the one we have in Iran or the new one developing with Israel and Lebanon.”

Attempts to regulate gas prices by the provinces simply add another level of complexity and cost.

“Politicians want to be seen as doing something and unfortunately even though doing something means long-term (that it is) detrimental, there will be some quick wins (politically) if you announce regulations.”