Tuesday, September 06, 2005

Fuelling Outrage

When Canadians have to pay $1.50 a litre for gas, what do most of them do? What they always do: demand the government do something about it for them!

Almost half of Canadians wanted to see their petroleum resources and their gas companies nationalized as fuel prices hit record levels, a new poll suggests.

The Leger Marketing telephone survey of 1,500 people was conducted between Aug. 24 and Aug. 31, the bulk being done before the devastating effects of hurricane Katrina were felt.


In the Leger poll, which was provided to The Canadian Press, 49 per cent of respondents wanted petroleum resources nationalized while 43 per cent said they would like to see the same fate for gas companies.

Quebecers were the strongest supporters of resource nationalization at 67 per cent, followed by residents of the Atlantic provinces at 53 per cent, Ontarians at 45 per cent and British Columbia at 42 per cent.

Forty per cent of respondents on the Prairies and 36 per cent of Albertans were in favour. Among those opposed, Albertans led the way at 49 per cent followed by British Columbians at 39 per cent.

Quebec led in support for nationalization of oil companies, with 61 per cent in favour, followed by the Atlantic provinces (46 per cent). Alberta was most opposed at 59 per cent, followed by the Prairies (49 per cent), B.C. 46 per cent and Ontario, 41 per cent.

You can't win with a populace that is ignorant of basic economics.

Gas prices are rising not because the oil companies are in collusion to gouge the consumer, nor because the world is running out of oil, but because of the lack of refining capacity to meet demand.

The U.S., for example, has seen its refining capacity decline since the mid-1980s, stabilizing at about 16 million barrels a day, according to the U.S. Department of Energy.

Canada's own refining capacity is running at about 2 million barrels a day with little room for increased production.

Katrina has knocked out refineries in the region which has the most refineries in the U.S., and the port through which the most crude oil is imported.

Refineries can't be restarted or built overnight; moreover, environmentalist lobbies have succeeded in loading oil companies with so many regulations regarding the building of new refineries that while forcing current operations to become more efficient, they have also hamstrung the building of new ones.

The price rises that are occuring now are to pay for the gas that has to be bought next week, at peak demand, not the gas that's already in the tanks at the service stations.

Nationalizing the oil industry would not build new refineries now, nor would it encourage exploration and drilling in new areas today. While holding the line or slashing gas prices at the pumps might bring temporary relief to consumers, it would not encourage them to change their consumption habits and force actual prices down. The costs of production and refining would remain the same, yet there would be no market mechanism to produce the profits necessary to cover the costs of increasing capacity and production to meet demand.

We'd have the same problem with gas that we have with healthcare; the price is great, but we can't get it when we need it.

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