Why an investigation into gas prices will come up empty
Industry Minister Tony Clement spoke for Canada yesterday.
As pump prices soared above $1.40 per litre in parts of the country, Clement made a strong political move – if one based on questioned rationale – in appearing to slam gas industry execs.
“No one can understand why last year when oil per barrel was around $140 or $150 a barrel, we’re paying $1.37 per litre. This year oil is south of $98 a barrel and yet we’re paying more,” he said, adding, “All I know is that prices are going up and down and sideways and no one really knows why.”
Clement pounded his fist on the issue, announcing he’ll call industry producers, refiners and distributors to Parliament for an explanation, but is one really needed?
According to the Ottawa Citizen, there have been six Competition Bureau examinations into gas pricing in the last 20 years, and every one found “no evidence of collusion or anti-competitive behaviour in the Canadian petroleum market.”
The big question now, once more: is there a conspiracy in how Canada’s gasoline is priced?
Probably not, notes Mike Moffatt, an economist at the Richard Ivey School of Business. The big reason gas is priced how it is, of course, is because of the price of oil. Generally speaking, the higher the price of oil per barrel, the higher the price of gas per litre.
But now, when the price of oil has dropped but the consumer cost of gas has not, we wonder why. Moffatt, who writes it better than anyone could paraphrase, says consumers are partly to blame:
“When crude oil prices are falling, gas stations will initially offer a small cut in gasoline prices. Consumers are grateful for the falling prices and feel that they are getting a deal,” he writes. “This causes consumers to cut down on their comparison shopping for gasoline.
“Since fewer consumers are looking for the cheapest station at which to buy gas, this slows down pressure for stations to lower prices. As a station owner, why bother cutting prices to be the best deal in town when consumers are not actively looking for the best deal? But as more consumers resume comparison shopping, prices fall in line with crude oil prices – exactly how markets should behave.”
You’ll notice that Clement, for all his posturing Thursday, ducked questions about whether his government would lower the federal taxes on gas, which account for about 30 to 40 per cent of pump prices in Canada.
But perhaps he shouldn’t be surprised if an investigation into possible collusion or price conspiracies, while smart politically, comes up empty.
By Jason Buckland, MSN Money
*Follow Jason on Twitter here.
Posted by: Chazztbay | May 17, 2021 9:24:08 PM
sic and tired that might be the stupidest diatribe I have read yet on this subject. As far as the government and taxes..read my above post. Secondly, concerning the seperate pricing for Canada and the world..again read my post.
As for the price increase..as I have said before. If you own anything, would you be willing to sell it for what you bought it for if the price increased to replace it ? No, you would sell it at market rate. That is why people who bought gold at $35 an ounce in the 70s or under $300 an ounce in the 80s don't sell it for that now, they sell it for $1500. Nobody would follow your illogic. The government cannot force speculators out because we don't live in North Korea. We live in an open market and the rates are set by buyers and sellers across the planet not just in Canada. Even if you outlaw speculating on Bay Street, it will happen on Canary Wharf, and Wall Street.
Subsidies are used for exploration and many of the companies actually would stop exploring because for every 1 successful well you get about 70-100 useless ones. That is a huge investment to undertake.
Thirdly, if you revoke rights you will destroy not just the oil and gas sector but then entire economy. Do you know why nobody used to invest in China and nobody will still invest in Burma, N. Korea and a few other places ? Because they will expropriate things there. If our government did, or even threatened to do that then the investments would dry up and nobody would want to business here.
Lack of action doesn't cause inflation. Price pressure does. If we all bought more food, clothes ect the prices would go up. You seem to have NO idea how this works.
Also as I have stated many times, any of you with RRSP's or any of you who pay into the CPP (all of you) own some of the banks and oil companies as this what CPP is mostly invested in.
Canadian Equities are: http://www.cppib.ca/files/PDF/q4_10_cdn_re_holdings.pdf
As you can see some of the biggest investments are in oil and gas, including the largest by far.
Int'l Equities are: http://www.cppib.ca/files/PDF/q4_10_foreign_re_holdings_v2.pdf
Again they hold a lot of oil and gas including a big investment in Exxon and BP (the gulf spill BP)
So maybe next time you people should do a little research before you get on your whiny rants.
Posted by: Faithless | May 18, 2021 1:56:40 PM
So, the gas companies basically point the finger back at the consumer, saying " it's your fault gas is so expensive!" & we should hunt for the best price to force competetors to lower prices? Should we have to go through all of that, really? You're going to tell us that the gas companies are unable to hear the public outcries over this issue? People need fuel. Gas companies have fuel and as long as they aren't competitive with each other, people have no choice but to pay what the companies want. People can't afford not to buy gas at all, it's become a necessity for many, to attend work / school. People have lost vehicles, or had to trade in vehicles over this issue. This issue, which seems to have gotten an incredible amount of media attention over the years, yielding no positive results whatsoever. Wasted ink, keystokes, public outrage, and tears. The 'powers that be' simply don't give a hoot.
Posted by: tim last | May 20, 2021 3:06:10 PM
maybe we should all buy electric !!!
Posted by: Bryan | May 25, 2021 12:19:31 PM
Gas prices are absolute BS because gas isn't the only thing made from oil. Take plastic for instance; plastic is in every electronics device we buy, every bottle we put our drinks in, every car, and even the oil that we buy at the store ourselves. You don't see the price of that stuff changing on an hourly basis or rising at an astronomical rate. It all comes from the same oil at the same well head. Gas prices are BS. All it is, is corporate greed. They don't need to make 11 billion profit to do business, they could probably do the same business and pay all their employees the same wage and and make 1 billion. B..........S..........