Tax Cuts Won’t Address the “C” Word

By Jason Menard

Rampant calls for a reduction in federal taxes on gas may make for good sound bites, but it doesn’t appear that any of our political parties have the teeth to deal with the real problem.

As Finance Minister Ralph Goodale states, any tax reduction at the pumps would be brief at best. Any gains would be lost within hours because the actual issue would continue to go on unchecked – the relatively unfettered ability of the oil companies to set their own prices.

No one wants to bring up the dreaded “C” word when it comes to the inner machinations of Big Oil, but it’s hard for the average taxpayer, who finds themselves paying more and more at the pump, not to believe that there is some form of collusion and price-fixing taking place at a higher level.

If, as the powers-that-be state, there is no collusion in the Canadian gas market, then we need to see transparency in the process for how fuel prices are set. We need to know what market forces go into the rapid fluctuations at the pump, because what we see on our street corners doesn’t necessarily reflect what happens in the market.

What frustrates consumers is that they feel like they’re being held hostage to speculation. Instead of dealing with the realities of the market, we’re driving to work each morning to see a price based on fear, anticipation, and opportunism. We’re paying today’s market price for previously purchased gas that’s already in the tanks. The average consumer is fed up of paying $65 a barrel premiums for fuel made from crude that was purchased at $55.

Generally, one would think that if you purchased a product at one cost, you’d retail it for a little higher price. Then, once your supply ran out and you were forced to purchase more, your new price would reflect what your actual costs were. Instead, the purchase price seems to have no bearing on the actual price at the pumps. For all we know, the gas in the tanks could have been purchased at $40 a barrel, but the second that there’s a hint of a hurricane, we see some opportunists push the $2 a litre threshold, without any real rationale for doing so, other than speculation.

Conversely, the laws of a free-market economy don’t appear to be holding any sway over the gas industry. As a business-owner, one would think that a gas company would entertain the idea of dropping prices or offering premiums to entice people to purchase gas from their institution. Essentially, in any other sector, one would find certain providers willing to swallow some profits in order to gain market share. Considering the howls of anger and the sense of powerlessness that the average consumer has shared, think of the goodwill that a gas company would earn by reducing the price of their product to meet the needs of the community.

If that precipitates a price war, then so be it! That’s what the market’s supposed to be about: freedom to choose, freedom to set your own price, and freedom to compete with others in your industry. Yet, we find the opposite taking place. Instead of companies competing with each other, we find them magically reaching the same conclusion when it comes to setting the price of their product. And it appears the higher the better.

Generally, if it looks like a colluding duck and it walks like a colluding duck, then the conclusions are evident. If that’s not the case, then the government has an obligation to prove that to its populace.

But let’s be honest. We know that no party is going to risk upsetting that giant elephant in the corner known as Big Oil. There is little political wherewithal to confront this powerful lobby group head-on and address the problems at their source.

So instead of curing the disease, we’re railing against the symptoms. Instead of truly dealing with an issue of interest to Canadians, we’re presented with catchy sound bites advocating ineffective tax cuts. It’s political opportunism at its worst at a time when we need true political leadership.

Calls for tax cuts and sniping across the House of Commons only prove to the Canadian public that our elected representatives are only looking out for their own interests and those of their party. By not dealing with the actual problem, they’re showing that the game of politics trumps the realities of life and the needs of their electorate.

Demanding accountability and transparency from Big Oil is not the easy fight, or the safest one – but it’s the battle that we want fought. And the party that takes up the call should find that they’ll be fuelled by voters’ gratitude in the next election.

2005 © Menard Communications – Jason Menard All Rights Reserved

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