Nova Scotians celebrated Canada Day last year with fireworks over the issue of gasoline regulation. And even though the uproar has since quieted down, a few more bursts of discontent will inevitably erupt.

The provincial government’s program, which went into effect July 1, 2006, was intend-ed to “protect consumers from the volatile ups and downs of the gas market,” proclaimed Jamie Muir, minister of Service Nova Scotia and Municipal Relations. Further, independent retailers would bask in the glow by having a “better chance to make a fair profit,” he said at the time.

Fearing regulation would mean even higher prices at the pumps, many Nova Scotians railed against the initiative. The Opposition Liberals joined the parade with a poll that showed opposition to gas price regulation was high in all parts of the province and urged the government to reconsider its plan. The government declined, Nova Scotians adjusted and the Liberals, struggling to find a visible leader and gain a toehold of favour with the public, have never conducted a second poll.

Under the regulated system now in effect, prices posted at gasoline stations across the province are valid for two weeks. The price of a litre of self-serve gasoline is set using the New York Harbor spot price — the industry base for gasoline prices in North America —as the benchmark. Added to this is a fixed wholesale margin of 6¢, a transportation allowance of 0.3¢-2¢ and a retail margin of 4¢-5.5¢ for self-serve.

The province is then divided into zones for “price adjustments” — what most people call “increases” — that reflect the cost of transporting gas. Still, Muir has promised, the difference between the highest and the lowest gas price in Nova Scotia will be within 2¢.

The government also offered a veil of protection against sharp spikes in pricing. Should there be significant changes in world gasoline markets in a two-week price period, an “interrupter” formula can be invoked to ensure prices don’t go through the roof.

In addition, the government has contended that regulation would help independent retailers, especially those in rural Nova Scotia, earn a fair profit. Under the program, retailers were offered three options regarding their supplier contracts: they could continue in their current contracts and be guaranteed the regulated self-serve margin; they could forgo the regulated margins in favour of compensation outlined in their contracts; or they could enter into a new contract with the wholesaler’s agreement.

All that sounded good — at least, until suppliers looked at their profit margins. In response to what it claimed was a losing proposition, Wilson Fuel Co. Ltd. recently cut off its supply of gasoline to 11 independent rural retailers. In a note that arrived a day before gasoline was supposed to be delivered, the wholesaler told the gas retailers that it could not “attain product to supply dealers at the regulated price,” and that the “supply of product is terminated effective immediately until conditions exist that permit supply.”

Then the fireworks erupted.

During question period in the legislative assembly, Muir claimed a Wilson Fuel’s rep had had a conversation with a government staffer during which the wholesaler’s rep had gloated that cutting off the independent retailers would “put a bullet in their head as a protest against regulation.”

Wilson Fuel’s president ranted that no employee had ever said such a thing. Muir rose in the legislative assembly to mumble something about “hyperbole” but never apologized. Then, Wilson Fuel suddenly found a lower supply of gasoline, the price at the pumps went up and service was restored to the rural retailers. However, Wilson Fuel’s vice president warned that the action was “doomed” to be repeated because the provincial government’s regulation process requires a certain amount of guessing. If a wholesaler doesn’t know what it can sell a product for, the potential for dipping into the red is significant.

For now, however, Nova Scotians have gone back to being bored about the issue of gas regulation. But that ennui may be interrupted again this coming Canada Day as the province’s regulatory system calls for an annual review. More fireworks await. IE