Nothing says “addicted to oil” like the whining that accompanies big increases in the price of gasoline. It has the same irrational tones as someone who’s struggling with a decision to quit smoking.
Only we can’t quit driving in the same way we can quit smoking. Our economy is built around the transportation of people and goods, and the energy driving that — gasoline and diesel — are as vital to our lives as electricity, natural gas and clean water.
However much we may desire to cut back on our addiction, we will never be free of it.
Even so, despite the sure-as-spring predictability of price hikes for the Easter, May and July long weekends, our participation in the free market for gasoline is a testimonial to the whole ethos of free markets. The ramifications are just as complex.
There is no imminent danger yet, we are told, but if the summer price hike is as steep as the Easter hike, bank stocks could become fragile.
Because the laws of price and demand in gasoline are so divorced from consumer behaviour that analysts are beginning to worry that money meant to pay debts or buy other consumer goods will be poured down gas tanks instead. That’s classic addict behaviour.
Gasoline prices have been held low due to suppressed demand in the U.S., caused by their weak consumer economy.
But when even a little warmth arrives, the first consumer good to see a rise is gasoline.
And when push comes to shove, people will stop eating out, see fewer movies, buy no new clothes, rather than drive significantly less.
Even though oil prices have been fairly stable, there has been a loss of refining capacity because — as unbelievable as it sounds — some refineries shut down, due to poor cost competitiveness. Refineries do sell to addicts, but we are extremely cost-conscious addicts, and the free market is weeding out the weaker players, concentrating the supply prize to the winners.
Canada’s gasoline market is said to be more regional than continental — which works to our advantage. Alberta has a unique mix of the highest refiner margins in Canada, the lowest gas taxes, and the lowest retail margins in Canada. Compared to the rest of North America, it is cost competition in the extreme.
Don’t yell at the gas station owners — they get the smallest slice of the price pie of anywhere in Canada. Don’t yell at the government (well, OK, yell anyway), they take the lowest tax slice of any government in Canada.
Certainly don’t yell at the Greens who are delaying pipeline projects left, right and centre in North America. Our crude sells to regional refiners at a 30 per cent discount because of our lack of pipeline capacity — allowing them the highest per-litre profit on gasoline in the country, while still delivering at Canada’s lowest wholesale price.
That would be like the province raising taxes by another billion or two a year, and still having the lowest rates in Canada, by far.
When there’s a free market for everything — even taxes — you can’t blame the people who take advantage.
Consumers can’t entirely do without gasoline, electricity, natural gas or clean water. The only option we have is to change our own behaviour as far as is reasonable.
Spring has sprung and at least 10 per cent of Red Deer workers can now bike or walk to work. That’s a savings in gasoline costs of $500 or more per summer per person.
We can car pool, use public transit and attempt to organize our trips to accomplish more errands when we do drive. We can drive less aggressively, which also saves on fuel.
But will we? Whining is addict behaviour. Changing behaviour is making free-market choices that reflect all the way to the bank.
Greg Neiman is an Advocate editor.