Canada, one of the largest oil producers in the western hemisphere is facing something of a mini gas crisis. For the third week in a row, gas prices have risen, to the point that gas is now closing in on the dreaded dollar-fifty-per-litre level, a price heretofor unseen in this country. As the price of gas trends steadily upwards, consumers and economists are starting to scratch their heads. Not only is the Canadian Dollar currently worth more than the American Dollar, the price of oil is actually much, much lower than it was last year when the price of gas spiked up to $1.35 per litre — 30% lower in fact — the price for a barrel of oil is currently 100 dollars, compared to 140 a year ago.
What is particularly strange is the relatively little commotion that the record-high gas prices are causing in Canada, which raises an interesting point; are Canadians too accepting for their own good? Could the fact that Canadians don’t make a commotion about the price at the pump be leading to gas prices that clearly do not add up?
While Industry Minister Tony Clement vows to seek answers from gas companies, I think that a simple explanation is the most likely: why would gas companies reduce the price of gas when the demand hasn’t changed? People today aren’t driving their cars significantly less than in 2008, despite the extremely volatile price of oil. If gas companies can sell gas for the same price or more as when oil was 140 dollars a barrel, the profit margins are much bigger now that a barrel of oil is only 100.
Other sources blame oil speculators on the futures markets for the extremely volatile oil prices that cause gas companies to have to keep prices high. But the reality is this: if people responded to the high gas prices by driving their car less, the prices would invariably come down. Unfortunately for many Canadians, driving means the daily commute to work and while many could cut down, cutting it out completely is simply not an option.
Even non-drivers should be concerned about the price of gas. The price of gas has an effect on the entire economy, not just on the wallets of people who drive. Food prices, the price of goods, almost everything that you can buy is effected by how much it takes to fill a transport truck up with gas. Those prices are passed on to the consumer, and have large multiplier effects throughout the economy. Whether or not Tony Clement’s probe into gas companies accomplishes anything, Canadians as a people need to keep vigilant in order to fix these problems without needing the government to step in and fight our battles for us. Letters to newspaper editors, open discussion on the internet, demonstrations and other forms of activism can be extremely effective in bringing the truth to light, and holding the people who are responsible accountable. Other companies have made the mistake of assuming that Canadian consumers are pushovers (I’m looking at you Rogers, Bell and Shaw), and have paid the price for it. Perhaps it’s time for a similar shot across the bow to let the gas companies know that Canadian consumers don’t take kindly to being gouged.
- Ottawa to ask oil industry how it sets gas prices (globaltvbc.com)
- The real reasons for the gas price spike (financialpost.com)
- Gas Prices, Criticism, and Ethics (businessethicsblog.com)
- Ottawa to ask oil industry how they set gas prices (canada.com)
- Industry Minister Clement calls on oil industry to explain rising gas prices (calgaryherald.com)