No mystery behind gas prices

So the B.C. Utilities Commission reports there is "a significant unexplained difference" in gas prices between Metro Vancouver and Seattle. The differential is around 13 cents per litre.

This finding came after Premier John Horgan complained of corporate "gouging" and asked the commission to hold a public inquiry into the matter.

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In passing, that's a bit rich from the premier of a province which taxes gasoline at a whopping 28 cents per litre. By comparison, state gasoline taxes in Seattle are just 13 cents per litre. Might that be one cause of the "significant unexplained difference?"

But the broader issue is this. It's the avowed intent of our provincial government, as it is Ottawa's, to reduce fossil fuel consumption by various means. These include carbon taxes, stifling regulatory processes and public shaming.

Indeed, carbon taxes were introduced with the explicit purpose of pricing fuels like gasoline to heights that would discourage their use. Costly gasoline isn't some unexplained mystery. It is the consequence of deliberate policy.

However, there's another aspect that needs examining. In normal circumstances, if you reduce the supply of a product or service, its price goes up. This has been known since Adam Smith's days, though it is apparently news to some politicians.

Yet that consequence only follows if demand remains high. If you have at hand an alternate product, supply can be cut and the price won't go up, as consumers switch to the fall-back option.

So is that where we stand? Is there an alternative to fossil fuels readily available, such that we can make gasoline less obtainable and the price won't increase?

The answer is no. Currently, renewable sources of energy contribute just 17 per cent of our national requirements. We are nowhere near ready to replace fossil-fuel consumption, nor is it likely we will in the foreseeable future.

According to the Manhattan Institute, the solar panels we have today are already at two thirds of their maximum achievable efficiency. Wind-power turbines, likewise, are at two thirds of their potential output. These limits are set by physics, not politicians.

Let's step back for a moment and consider how new technologies became available in days gone by. The sailing ship wasn't replaced by government fiat. It was replaced because steam power proved reliable and more cost effective.

Horse buggies weren't forced off the road by crusading politicians. They became obsolete when the combustion engine arrived and proved a better alternative.

Wireless telegraphy didn't replace hand-delivered messages as the result of public policy. It came about through invention.

In none of these cases were governments the change agent. Old and less efficient technologies were abandoned only once superior versions emerged as viable replacements.

This is not to say that government has no role in driving innovation. For example, a variety of new drugs have been brought to market because public agencies funded the necessary research.

But never before, in any instance I can recall, have technologies central to our well-being been abandoned before better options had been found and proven able to supplant them. Yet that is where we are headed.

The presumption appears to be that if we kill off fossil fuel, the pressure generated will summon the required alternatives.

Perhaps in the very long run it will. But in the near term, the result will be shortages, and to repeat the obvious, when demand remains high, those drive up prices.

If I may amend a quote by Sir Humphrey Appleby from the British sitcom Yes Minister, the cause of the gas price differential "is not shrouded in quite such impenetrable obscurity as (the commission's) disclosures may have led (us) to assume."

It is the inevitable outcome of government policies in which ideology has trumped practicality.

-- Lawrie McFarlane, Victoria Times Colonist

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