Is Pump Pain Canada's Gain?

Gas prices have hit near-record highs across the country. Cue the pitchforks, torches, and posturing politicians.

Industry Minister Tony Clement will call oil executives to special parliamentary committee meetings to explain why gas prices have skyrocketed in recent weeks. Mark Bonokoski of the Sun chain stirs up some populist rage by blaming just about everybody ­– Big Oil, environmentalists, the government, and especially commodity speculators – for the hikes. “An oil rig burps air in some far off sheikdom and these commodity speculators immediately panic, the markets go into a frenzy, and the price of gas skyrockets,” he says, noting that lower-income Canadians bear the brunt of rising inflation due to increases at the pump. “Arguing high commodity prices are good for the economy when the price of food is stretching budgets to the limit is an argument that has a short self life for the average Canadian.”

Meanwhile, Stephen Gordon of The Globe and Mail's Economy Lab argues just that ­– because Canada's a primary resource-dependent country, the pains felt at the gas pump are mitigated by the overall benefit to the economy when one of our chief exports is so valuable. While gasoline has gone up, “the prices of other goods have fallen, most notably imported goods that have been made cheaper by an appreciating Canadian dollar. The overall net effect on Canadians’ buying power is positive.” A much bigger concern, says Gordon, are families whose incomes are too low to be able to absorb these shocks.

And in a column that should be read by anyone complaining about $1.40/litre gas, the Toronto Star's David Olive dispels the belief, however prevalent it may be, that high gas prices are part of an oil industry conspiriacy. When prices inch up a few cents, “Demand plummets and the cash registers go silent ... In order not to scare business away, filling stations pare their own profit margin or operate at a loss to keep the selling price as low as possible.” In essence, refineries and gas stations feel the pinch even more so than people's pocketbooks. And when the National Post praises a Toronto Star column, there must be some truth to it.