Report calling for end of gas price regulation flawed, says economist
'It's an incredibly low-quality piece of work,' says University of New Brunswick economics professor Rod Hill
A Nova Scotia-based think-tank says gas price regulation has taken millions of dollars out of the wallets of drivers in Atlantic Canada, but an economist says the report is filled with factual errors and the methodology is flawed.
All four provinces in Atlantic Canada have regulated gas prices. The Atlantic Institute for Market Studies (AIMS) recently released a report looking at the difference between what consumers paid for gas and what they would have paid if prices weren't regulated.
By its calculations, this has cost consumers $205.9 million since each province instituted regulation. The think-tank is calling for the end of gas price regulation.
The report received extensive media coverage, most of which parroted the report's findings, including some coverage by CBC News.
- New Brunswickers pay higher prices at the pumps than other Canadians, report says
"It's an incredibly low-quality piece of work, which I would reject from an undergraduate student," said Rod Hill, an economics professor at the University of New Brunswick in Saint John. "All of the headline numbers in that report are wrong."
As part of its report, AIMS calculated what it called "marketing margins" — the difference between what consumers paid at the pump and the New York Harbour spot price for gasoline.
Generally, the report found, that margin was higher after regulation. In all, the group concluded regulation had cost Atlantic Canadians $205.9 million.
The problem, Hill said, is when AIMS made adjustments for inflation, it used a U.S. price index, not ones for individual provinces. He noted a previous AIMS report in 2009 didn't even adjust for inflation.
Hill has long been at odds with AIMS over its gas price reports. In 2009, he countered an AIMS study with a report of his own called Debunking the Myth That Gas Price Regulation Robs From Consumers. He found there was little to no cost to consumers in Atlantic Canada.
'They're aware of the problem'
Hill said there's one other major flaw in last month's AIMS report: The math.
The report relied on Statistics Canada gas consumption numbers, but understated them by a factor of 1,000, Hill said. He also said the decimal point used in the marketing margin was in the wrong place.
All told, it meant AIMS' numbers were off by a factor of 10, he said. For example, while AIMS calculated the cost to Nova Scotians at $18.2 million since 2009, it should have been $182 million if the report is to be taken at face value, Hill said.
"This is sure proof of incompetence, rather than deliberately cooking the numbers," he said by email.
Province weighs in
The province also cast doubt on the findings of the report.
"Industry experts have questioned these findings," said Service Nova Scotia Minister Geoff MacLellan in a written statement.
"We continue to monitor regulation and the impact it has on consumers and industry. This includes continuing to work with industry to collect more information, which will help us determine if gas pricing regulation is being done in the best way for consumers and retailers throughout the province."
AIMS tight-lipped about methodology questions
AIMS' president and CEO Marco Navarro-Génie spoke to CBC News about the report's findings, but efforts to interview him on a second occasion to discuss the methodology were unsuccessful.
Operations manager Alex Whalen said on Aug. 29 that AIMS would be issuing a press release, likely on Aug. 30, "to counter some claims that have been made about the report," but no release has been issued.
Whalen did not respond to subsequent interview requests.
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