By Marco Navarro-Génie (AIMS President and CEO)

Marco Navarro-Génie is the author of the AIMS study “What’s Still Missing From Your Wallet?”

Even if well-intentioned, gasoline price-controlling takes from the poor, is antithetical to
properly functioning markets, and is a major price to pay for the minor benefit of having less
mercurial price fluctuations in the market.

Government policies are often contradictory. This is not directly the result of conspiracy or ill
intent. Governments are no different than individuals in this regard. We all embrace beliefs that
in the light of rational scrutiny sometimes contradict other beliefs we also hold.

To counter these contradictions, it would be beneficial for Atlantic Canadian governments to
modernise and streamline ineffective legislation to reflect the more modern and economically
open societies we are becoming. It would also send a signal that we are friendlier to business and
investors.

One good place to start is the government-controlled gasoline pricing, which continues to cost
consumers millions of dollars. The regulatory system, in place since the last decade, needlessly
manipulates market prices.

The latest study by AIMS found consumers in Nova Scotia are paying up to 2.5 cents extra due
to regulation. In the other Atlantic Provinces, the amounts are smaller and in some towns and
cities may be paying slightly less, but there is a significant overall burden, totalling upward of
$200 million.

The study estimated gasoline consumers have paid in excess $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 Prince Edward Island (since 1991) since the inception of the
price-fixing scheme.

Let’s be reminded that gasoline price control was largely instituted to deal with consumer anger
over rare but large fluctuations in price. But the core business of government is not to act as
collective anger management therapist.

The other stated goal of seeking stability for rural markets is well worth considering, if only to
recognise that it has failed. People from small communities are still travelling to bigger
communities to get cheaper gasoline, for example finding up to a 12-cent differential in
Newfoundland, where no price floor exists.

While it may seem like only a few cents here and there, regulation adds an extra cost to an
already overtaxed commodity. This is to say nothing of $200 million that consumers themselves
could have elected to spend elsewhere.

A litre of gasoline in Atlantic Canada is already heavily taxed. Atlantic Canadians spend their
after-tax earnings on gasoline, which have been taxed at an average of 26 percent. This means
that to take $1 home after tax, you need to make $1.35. Even before buying the fuel one is
already paying $0.35 in tax.

Gasoline then gets hit by two different pairs of taxes each at the provincial and federal level
worth $0.24 on each litre. Adding more tax to that injury, the combined federal and provincial
sales tax (HST) adds another 15 percent to the whole. Once we account for the extra cost of the
price-rigging regulation and income-tax, for every dollar of price-regulated fuel one puts into a
vehicle in Atlantic Canada, 55 percent of the income needed to buy the fuel goes to the
provincial or federal government.

While price controls are anathema to freer markets, one must also consider how increased fuel
costs have an impact on the low-income members of our society. Policy makers impose greater
costs on hard-working single parents or the elderly, who are often on fixed income.

Governments in this region who claim to want to attract new business send the wrong signal with
these policies. Gas regulation and other anti-market policies may turn off investors and business
owners about our region.

Governments that intervene to distort large and small areas of the market will turn people away.
Gasoline price-control does not exist anywhere else in Canada, except for Quebec, which hardly
is a universal economic model for our region.

In keeping with the necessity to favour policies that develop greater entrepreneurship, we should
rely on free-market devices when feasible. This is one such case. The four Atlantic Provinces
should abolish their respective gasoline price regulation.

Marco Navarro-Genie is the President and CEO of the Atlantic Institute for Market Studies
(AIMS.ca)