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June 28, 2006

The Right to Pay More

I'm going to de-lurk (from my own blog!) long enough to vent about a political issue: a very bloggish thing to do, no? Gas prices are going to be regulated in Nova Scotia, starting July 1. The Minister (that's the department head for you Usanians) of Service Nova Scotia says

"Regulating gas prices will protect consumers from the volatile ups and downs of the gas market and independent retailers will have a better chance to make a fair profit."

I think it's rich that this is being spun as consumer protection. Strangely, nobody is denying that this will result in higher prices overall. What consumer in her right mind wants to pay more? The windfall of this scheme is supposed to benefit independent retailers: read "rural gas station owners". Of course, they love this idea. Their spokesperson says it will be a lot more sane (his word) now that "the operators will know exactly what profit they can earn." I've got news for you, buddy: there was already a way to know exactly what profit you can earn. It's called the market. Sometimes the market is insane, but that's life.

The boosters of this policy are saying "Oh, but it works in Prince Edward Island!", but they aren't thinking clearly. Yes, it does seem to work in PEI. That's because PEI is -- all together now -- an island, and it costs at least $40.50 to get your car to the mainland. Talk about your barriers to entry! Nobody is going to drive to New Brunswick for cheaper gas with that kind of disincentive. So gas stations could charge whatever they felt like charging and people would have to pay it. Island economies are the chink in my libertarian armor; I could see why regulation is preferable in that case.

But in this case, I predict regulation is going to bite the independent retailers in the ass. Before, they could raise their price to whatever people needed to pay to get between Antigonish and Guysborough, let's say. If they were the only gas station in town, they could raise their price to whatever the local market would bear: sort of a mini-PEI. But now their price will be mathematically determined using a regional system that divides up the cost of gas among manufacturers, wholesalers, retailers, and transporters, based on nothing more than what lawmakers needed the total to be (minus their cut, natch). Are Antigonish and Guysborough in the same region? If not, then gas prices will be different. I can promise you right now that I won't be stopping in Region 2 on my trip to Region 4 if Region 3 has a lower legislated price. They're gonna be sorry they tried this.

Posted by The Greatness at June 28, 2006 09:18 AM


Reminds a person of the banks raising service fees in order to "serve you better". Make sure you have a full tank of gas they say, before Saturday and the beginning of the regulations. Happy Canada Day...don't you all wished you lived in Alberta.

Posted by: Sweetness at June 28, 2006 01:04 PM

This has nothing to do with gas prices, but looks like Wil Wheaton's been doing some PEI traveling, (see his blog) too. Rather timely. Maybe he reads The Greatness.com?

Posted by: karen-the-great at June 28, 2006 01:14 PM