The incredible drop in gas prices over the past six months has most drivers cheering but there is still room for complaining. Some demand to know why the major gas stations consistently keep their prices anywhere from three to five cents higher than Costco, ignoring the fact that businesses are free to set whatever price they like on commodities and consumers are free to shop where they can get the best price. Furthermore, nobody complains about the differences between the price of a jug of milk or a loaf of bread from grocery store to grocery store, so why the bellyaching about gas prices?
For others, gas prices haven't fallen far enough. In his letter to the editor in Thursday's Citizen, Brad Kope of McBride demands to know why the price of oil has dropped by more than half on the world market but the price of gas has not also dropped by half. Kope's ire should not be directed towards oil and gas companies but towards the provincial and federal governments.
Gas prices have dropped but the gas taxes imbedded into the price of gas have not. B.C. drivers pay roughly 30 cents of tax for every litre of gas - 20 cents to the provincial government and 10 cents to the federal government - regardless of whether the price at the pump is 80 cents or a buck fifty per litre.
Once the gas taxes are taken out of the equation, Kope's wishes have already been met. With prices at $1.35 per litre last summer in Prince George and 30 cents taken up by taxes, that meant $1.05 per litre went to industry, when the price of oil on the world market was about $100 per barrel. With global oil prices now less than half that, drivers should expect a drop of about 52 cents (half of the pre-tax price) at the pumps. At least in Prince George, drivers have seen a drop of about 50 cents in the price of gas compared to this time last year.
Kope might be alarmed to discover that some people close to home view oil at 50 bucks a barrel and gas at 85 cents a litre as a disaster and long for the glory days of high prices and big profits for both.
Prince George-Peace River Conservative MP Bob Zimmer posted a link on his Twitter feed Thursday morning to a National Post article featuring industry experts warning of a spike in oil prices to $200 a barrel due to production cuts eventually leading to shortages. That's not to say that Zimmer would like to see prices soar like that, but many of his constituents in the northeast corner of his huge riding would certainly welcome such a development.
Much of the story Zimmer linked to is loaded with hopeful comments by various senior political and oil industry leaders that this drop will be short-lived and prices will rebound soon. Russia's deputy prime minister is quoted as saying the bottom is in sight and the price of oil will not fall below $40 a barrel. If there's anything to be learned by the events on the world energy market in the past six months, it's that the marketplace and the price does not bow to the whims and desires of politicians or producers, regardless of their power.
The most insightful comment in the story is in the final paragraph, where Abdullah Al-Badri,the secretary-general for the Organization of Petroleum Exporting Countries (OPEC), asks "Why should low-cost producers cut their output to make way for high-cost producers. It doesn't make any sense." That is the essence of the price drop right there. Middle East producers refuse to surrender market share to the Alberta oil sands, the shale developments in the U.S. and other expensive oil-producing projects.
The response from the Middle East has been blunt. By maintaining production levels, Middle East oil players are forcing high-cost developments everywhere else to cut back or loose their shirts. Saudi Arabia is still making money with oil at $45 a barrel but that's not a sustainable price over the long term in Fort Mcmurray, North Dakota and, alas, even in Zimmer's stomping ground up in Fort St. John.
Zimmer is cheerleading somewhat in his Tweet for the return to higher (and therefore better) prices. After all, he didn't offer up a link to a story from the BBC, quoting the head of British Petroleum (BP) saying his company was planning on oil prices remaining low for up to three years.
Probably not the upbeat optimism the folks in Fort St. John want to hear from their hardworking Member of Parliament but it's music to the ears of someone like Brad Kope and many other drivers across the region.
Fill 'er up.
