Friday, May 13, 2011

Gas Price and Government Regulation

The government is preparing to give oil industry representatives a "tongue-lashing" over high gas prices. Canadians are convinced - rightly so - that a Tony Clement tirade will have the same effect on gas prices as the outfit next worn by Lady Gaga. (Aside: Does anyone seriously believe oil executives haven't faced more intense grillings outside of Ottawa? Tony, dude.)

Now, the good news is that Finance Minister Jim Flaherty is on record saying "Governments should not be regulating markets." Indeed they shouldn't. The trouble is that Flaherty's own government saw fit to intervene in the market in 2009 and has no plans to deregulate markets it currently controls, save a campaign promise to trash the Canadian Wheat Board. This makes it challenging to take Flaherty's word at face value.

The truth of the matter is that every major political party, including the CPC, considers the Capitalist ideal of free markets to be made of paper mâché. The GOC regulates many aspects of the economy and they will regulate gasoline/diesel if the conditions are "right," the same way the CPC pursued its Keynesian interventionism in 2009 because conditions "demanded action."

The CPC has proven time and time again that it is a fair-weather or middle-of-the-road party, to quote von Mises, when it comes to free market Capitalism. The best that Capitalists can hope for at this point is that conditions do not materialize that "force" the government to intervene. Conditions are the only thing standing in the way of government intervention into fuel markets. Ideals surely are not.

One point I find mildly amusing about the specter of government upbraiding oil companies is the duplicity of the government having both hands completely immersed in fuel-based revenue yet screaming at the guy whose higher prices dumps even more revenue into its coffers (via percentage-based GST/HST).

If government wants to have a clear conscience beating up oil companies then the least it can do is grant a GST/HST exemption for gasoline and diesel. Not only would it lend validity to its belligerence, but it would ease the strain on voter pocketbooks and signal to the public that the government is serious about reducing gas prices the Capitalist way instead of using hollow political theatrics and meaningless dress-downs of industry executives.


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