Gas Prices Could Cause A Recession

Fools make researches and wise men exploit them.

H.G. (Herbert George) Wells (1866-1946), British author.

Well, this was not the article I had originally planned on writing. I had, in fact, already started another one but events preceded me. So, instead I find myself changing subjects and writing on the one topic that has been on everyone’s mind lately. No, I am not talking about hurricane Rita but gasoline prices.

We are all aware of the madness that happened recently when a rumour of gasoline prices reaching two dollars a litre circulated. There were line-ups of panicked people buying gas and a fight actually broke out at one gas station in Toronto. But where did it all begin? No one seems to know.

What did, in fact, happen is a few individual gas stations across the province, and other provinces, suddenly cranked up their prices by as much as seventy cents per litre or more. The only explanation anyone could come up with was it was a reaction to the possible disruption of the refineries in Texas caused by hurricane Rita. (Okay, I guess in a way I am writing about hurricane Rita.)

Chaos ensued with people rushing to buy gas at the current price (no matter what, I cannot bring myself to call it a low price). The premier called on Ottawa to do something and the oil industry spokespeople scrambled to settle everything down. Their explanation was it was a few “independent” stations that did this.

The reality is the stations I have seen on the news with these outrageous prices were none other than (drum roll please) our very own PetroCanada. Not only is this not an independent but these stations are not allowed to adjust their prices without permission from their head office. But the oil companies would like us to believe that these were just a few rogue stations.

Of course, our governments, both federal and provincial, are out to lunch again. Premier Dalton McGuinty, reacting to the madness, called on the federal government to investigate.

"Why is it (gas prices) seem to go up so much faster than they come down?" he said at a Liberal caucus retreat in Kitchener, Ont.

Hey Dalton, who cares? Wouldn’t it be better to investigate their manipulation of the market in the first place? Oh, and by the way, why don’t you actually do something about it like you promised you would?

However, the federal government is investigating, again, why the prices vary so much throughout the country but are regionally the same no matter what the company. Never mind that they were supposed to set-up a department to oversee the petroleum industry two years ago. Why bother, when the oil companies are doing such a good job making sure that they don’t rip us off.

So, here is my theory as to what happened. I believe PetroCanada told these stations to raise their prices. They may have done it in collusion with the other players but the effect was the same, they sold huge amounts of gasoline. The oil companies made a killing last week off these few stations jacking up their prices and, to top it all off, suddenly the current prices seem cheap. Go figure.

Think this if far fetched? Just look at some of the other things that we see and hear. Have you ever seen another industry that says they have to raise their prices to be the same as everyone else to stay competitive? That’s like saying no one is going to buy a car because it is cheaper than other makes.

Then, there was the huge increase early in the summer. According to the industry people, this was due to reserves being low. Why, going into the summer driving season, would they not have increased reserves, especially when this happens every year? I’ll tell you why, because then you can artificially inflate the price and make more profits. Never mind the fact that, a month later, we discover the reserves are in fact higher than they were last year. Oh, and what happened to the prices after this news broke? Absolutely nothing, they stayed the same.

And then there was hurricane Katrina, followed by Rita. With the disruption of the refineries and oil platforms, we were, of course, going to pay more for gasoline. After all, Louisiana is responsible for ten percent of United States refining capabilities while Texas accounts for twenty-six percent. Hmmmm, last time I looked we were not sending our oil down to Texas to be turned into gasoline for Canadians to use. Unless, of course, it is for all those Canadians who like to winter down there.

We desperately need our governments to get off their collective butts and actually do something for a change. The time for mollycoddling this industry has to end or it will destroy this country.

With the increase in energy costs, consumer goods cannot help but increase in price and this includes necessities such as food. Add to that the increased price of fresh vegetables and fruits come winter when they are being brought in from the United States. Five dollars or more is not out of the question for a head of lettuce and, when you are paying those kinds of prices, you have very little left for that new TV. This creates a trickle down effect with people having less and less disposable income to spend on luxury goods. This is how recessions start.

Soon manufacturers and retailers have no choice but to start to lay people off as inflation takes it toll on the economy. Interest rates start to soar as the Bank of Canada attempts to stir investment. All those people who bought their big cars and trucks at employee discount pricing are out of work and can’t afford to pay for them. Families living in quarter million-dollar homes bought while interest rates where low, find the cost of their mortgage sky rocketing while they hang precariously on to their jobs. Money for food is hard enough to come by let alone extras, so the cycle continues.

Scary? It could happen unless the government does something now. And it has to be meaningful. Harebrained ideas like allowing some sort of rebate on income tax won’t do me a whole lot of good if I am out of work because I couldn’t afford the gasoline to get there. I do have to agree with the government on one thing, (mark that on your calendars) cutting the gas tax would not help, the fuel companies would only pocket the money.

We have to stop looking at oil like some manufactured product and start treating it like the natural resource that it is. We don’t send all our lumber to the United States and then import more from Europe nor do we send our iron ore there and then buy steel from China. Why then do we allow the oil producers to ship the majority of our oil to the United States and then buy what we need for domestic use from overseas?

We need true action now. You and I know we are being gouged, you can see it just in the difference in price between London and Strathroy, so why can’t our government? The truth is they can but refuse to do something about it. But, for a change, we have some power because there is an election coming in the near future. Just for something different, let’s keep the pressure on and get something done. Put aside the typical Canadian apathy and force your Member of Parliament to actually earn the title of honourable. This time there is too much at stake.