| Apples and Oranges In April 2007 the Globe and Mail invited subscribers to its website for a question and answer session with their writer on energy issues Shawn McCarthy. To a question by Alex Keuper of Santa Barbara California as to why gas prices are so volatile in Canada, Mr. McCarty replied it was because of large signs. Hi Alex. Thanks for your question — which is one of the main pre-occupations with Canadian drivers. A couple of factors drive the volatility but underlying them all is the realization that there is very open competition — with big signs on street corners — among very few players in the market. So companies can see the prices of their competitors all the time … Kim Morton from Qualicum Beach, B.C. asked “why can we not have a Canadian price for gas that reflects the true cost of production and an export price that is open to the highest bidder?” According Mr. McCarty, this is because selling a non-renewable, strategic resource like oil is no different than selling and buying oranges. Kim, the simplest answer is that we live in a country with a market economy, and that goes for gasoline as much as it does for house prices, the cost of shoes, and oranges in the winter ... Max Vere-Holloway from St. John's suggested collusion, or greed, was the cause of high prices and, in support of Mr. Morton's suggestion, wrote: “Canada is self sufficient in Oil and Gas, perhaps it's time to introduce a Canada first policy." McCarty both agrees and disagrees with Max's claim of collusion or greed in the oil industry, it may have something to do with the Saudi's??? As to Mr. Vere-Holloway's support of made-in-Canada pricing for oil and gas, Mr. McCarty reminded Mr. Vere-Holloway of his previous answer; that the sale of oil and gas is not only like selling and buying oranges, but also like selling and buying real estate. Max, I disagree - demand and supply for crude oil and gasoline play a crucial role in setting Canada's pump prices. But I agree with you that greed and speculation are also at play. As I suggested before, is that any different than the Vancouver housing market, or more aptly perhaps, the Calgary housing market? OPEC has proven to be pretty effective this winter at removing supply and supporting prices, but that is only part of the story. Producers like Saudi Arabia know that if prices go too high, more supplies will come on stream, from non-OPEC oil producers and alternative energy sources, and that drivers the world over will become more fuel efficiency conscious, thus reducing demand. North American gasoline demand did fall after the oil crisis of the 1970s. Canada is not doing itself or the world a favour by feeding the American addiction to cheap oil and gas as suggested by Don Karp: “Are gas prices really that high in Canada? It seems to me that gas prices are cheaper then any other industrialized nation (except the U.S.). And won't higher gas prices encourage the development of alternative fuels/more efficient vehicles?” The Globe and Mail's expert on energy issues dismissed this pertinent remark and eminently sensible suggestion with the standard oil and gas industry mantra that, it is an addiction we can not do anything about as “our society is built on low-cost fuel.” Bernard Payeur, April 6, 2007
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