Gas price regulation costing consumers millions: think tank

ST. JOHN'S - More than $65 million in extra money has been pumped out of Newfoundland and Labrador drivers' pockets and into oil company coffers due to regulated gas prices, according to a marketing think tank.

In the report, "What's missing from your wallets?", Bobby O'Keefe of the Atlantic Institute for Market Studies (AIMS) says regulating gas prices has cost the consumer more money in each of the Atlantic provinces.

O'Keefe said that an analysis of gas prices both before and after regulation showed prices were higher in relation to benchmark oil prices after the legislation was introduced rather than under an unregulated system.

O'Keefe noted the regulated prices are maximums, and gas stations could technically sell for lower, but that seldom happens.

"We found regulated prices were approximately, on average, 1.3 cents higher in Newfoundland and Labrador after regulation than they were before," he said.

That adds up to about $65,306,400 in extra money spent by consumers in this province since regulation started in 2001. Prince Edward Island, which has had regulation much longer, has seen an extra $63 million go to the gas companies, according to AIMS, while Nova Scotia and New Brunswick drivers have paid an extra $18 million and $9 million respectively since regulating gas prices in 2006.

O'Keefe said that a small amount of extra money also goes to the government through extra taxes earned off higher prices.

He said some provincial governments recognize regulating gas prices doesn't make gasoline cheaper, but they choose it because it offers stability.

However, he said the volatility of world prices that set the gas prices mitigates the benefit.

He admitted regulation means it may take a little longer for prices to change at the pumps, but it also can mean steeper hikes and deeper troughs when the change does come about.

"Instead of getting three, five cent changes, you get one 15 cent change," he said.

Officials with the provincial Department of Government Services said the minister was not available for comment Monday because more time was needed to assess the report.

However, local consumer advocate George Murphy of the Consumer Group for Fair Gas Prices criticized the AIMS report, saying AIMS used numbers that were far too high. He estimated the cost of regulation for the province at about $500,000.

He also questioned the use of information from the Canadian Association of Petroleum Producers, a group representing oil companies.

"It's not the first time they've spouted off on the costs of regulation, but we have yet to hear the constructive arguments from them on what to do to get some free competition going in the province - the chief reason why we have regulation in the first place," Murphy said in a release.

But O'Keefe said the report isn't advocating - it's simply giving information to consumers.

"We're looking at what appears to be a core public policy and we're showing people that it has a cost," he said. "It's up to consumers to decide if that extra cost is worth it."