Ë®¹ûÊÓƵ

Fueling anger

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Published on Thursday, May 24, 2018

By Kate Jackman-Atkinson

Neepawa Banner & Press

In a recent letter to the editor, a reader rightly pointed out that with all the hand wringing and editorializing about increasing Hydro rates, we haven’t heard much about rising fuel prices. It’s a good point, for most Ë®¹ûÊÓƵns, fuel is a much more significant annual expense than hydro and the price increases have been much larger.

This year, the Public Utilities Board approved a 3.6 per cent rate increase for Ë®¹ûÊÓƵ Hydro for 2018-2019. The increase was less than the 7.9 per cent the Crown corporation had requested. In contrast, over the last 12 months, the average price Ë®¹ûÊÓƵns pay at the pump for gasoline has risen from $0.963/L, to $1.27/L, that’s a 32 per cent increase.

Over the last two years, the trend for both crude oil and gasoline has been much the same.  Though there were highs and lows, the trend is upwards and the decline in prices at the pumps never seems to quite match the decline in the value of crude oil. Today, our price at the pump is similar to what we paid in 2014, though at that time, crude was worth $110 a barrel, far more than the $72 a barrel it’s currently worth.

In Ë®¹ûÊÓƵ, hydro and natural gas are provided by a monopoly, Ë®¹ûÊÓƵ Hydro, and as such, rates must be approved by a government regulator. The oligopoly that controls gasoline sales in Canada has no such requirement and while there’s no outright collusion, it’s rare that the prices at competing service stations don’t move in step.

In Canada, the idea of restricting fuel prices is usually met with strong opposition and in the west, still simmering anger over the National Energy Program (NEP). The NEP lasted from 1980 to 1985 and was set up to help Canadians cope with high fuel prices and encourage a stronger Canadian presence in the development of the country’s oil and gas industry. The end result however, was artificially low prices which helped consumers and manufacturers, located primarily in the east, at the expense of producers, primarily in the west. It’s estimated that Alberta lost between $50 and $100 billion in revenue because of the NEP.

Not only is there little political will, the energy industry is far too big a player in Canada’s economy for the government to dare regulate prices. According to the federal government’s Natural Resources department, in 2016, the Canadian energy sector directly employed more than 270,000 people and indirectly supported over 600,000 jobs. At 7 per cent, energy is the third largest contributor to Canada’s Gross Domestic Product (GDP), following real estate and manufacturing. The government also makes a lot from the energy sector, $12.9 billion in 2015.

The bad news is that prices are set to keep rising and there’s very little any Canadian government can go about it. Because much of Canada’s gasoline comes from American refineries, our price is heavily reliant on what’s going on south of the border. Factors like refinery and pipeline shut downs and increased demand for American crude all contribute to rising prices for Canadians.

Let’s not forget about the Canadian dollar, which has lost value relative to the US dollar, the currency in which all oil sales are priced.  While this is good for Canadian oil producers, it’s bad for Canadians at the pumps.

With the summer driving season upon us, where increased demand sparks higher prices, and a carbon tax coming into effect in Ë®¹ûÊÓƵ on Sept. 1, the prices are only going one way— up. Until we can better cut demand, it looks like high gas prices are back and despite Canadians’ anger each time they fill up, the government has little incentive to do much about it.