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The gas price knot

Gas pumps have taken on a whole new personality these days. In some ways they've become the "water-cooler" of commuters. As I filled up my SUV recently, groan, neighbourly chat started as usual with the vehicle driver next to me.

Gas pumps have taken on a whole new personality these days. In some ways they've become the "water-cooler" of commuters.

As I filled up my SUV recently, groan, neighbourly chat started as usual with the vehicle driver next to me.

"Well, at least it's down a little," I ventured.

"It's still outrageous," said the other driver.

"Well, maybe it will make us all think about driving so much," I said trying to be cheerful.

"Not it won't," was the answer. "I just go out less and I'm trying to spend less on food. I need my car to get to work and drive my kids to activities. I had to go to Vancouver for doctor's appointments. Those things can't really be changed so I have to change the things I can.

"It's a scam. Somebody's making money. Gas should be affordable in Canada."

I didn't really have a reply to that. And it's not having a reply to the outrage which is being felt by people all across Canada and elsewhere that may lie behind the federal Conservative government's decision to form a parliamentary committee on the issue.

"No one can understand why (in 2008) when oil per barrel was around $140 or $150 we were paying $1.37 per litre, when this year oil is south of $98 a barrel and yet we're paying more," Industry Minister Tony Clement told a news conference outside a Toronto family home last week as reported by Canadian Press.

"It's not transparent enough how these prices are arrived at."

This comes at a time when oil executives in the U.S. have been testifying before congressional committees about proposals to repeal tax breaks for large oil companies. And U.S. drivers are paying less for gas than we are.

It's not clear what our federal committee will accomplish at this point as no producers or retailers have said they will even appear to explain why gas costs so much and the general volatility of the market.

Gas price watcher Dan McTeague (tommorowsgaspricestoday.com) said he's worried an appearance at the parliamentary committee will be a waste of time.

"The volatility we saw at the pumps this past fortnight will not end with empty pronouncements by politicians to haul oil execs on the carpet at some future date, nor be adequately addressed by a phalanx of dismissive 'experts' who have an economic interest in avoiding the true reasons behind the upheaval and chaos in the energy futures markets," blogged the former Liberal Member of Parliament.

"As articulated for several years on this site, unregulated, over-the-counter markets are creating artificial demand for crude products and other commodities such as gasoline, diesel and jet fuel.

"This removes the underlying and indispensable role that supply and demand fundamentals play in determining an equitable price for our commodities.

"As such, with price having more to do with investor demand versus consumer demand, we are today paying as much as 40 cents per litre more for gasoline than necessary."

In the U.S. at least two senators are calling for the Commodity Futures Trading Commission to immediately impose regulations on oil speculation.

The argument is that limits on speculation would keep big investors from holding too big a slice of the market.

Changes at the pumps are usually associated with international headlines such as the earthquake in Japan, the uprisings in Libya and other regions in the Middle East, North Africa and so on. It's clear those events have some impact but when weeks, even months later the prices keep going up it's time to call a spade a spade. In this cycle gas prices jumped 34 per cent from February to May.

Regulation could bring prices down in days.

Or what about what Britain has done - they are taxing excess oil profits.

Or give consumers tax rebates since the federal government itself makes money off the rising gas prices with a national tax rate of 33 per cent. Why can't we get some of that back? Maybe the federal committee should be asking some hard questions of government?

Here in B.C. we also have the Carbon Tax.

Refineries are also playing a role in this equation. With few in this province we must import more product, adding the cost of transportation to everything else. While no one wants them in their backyard perhaps more capacity would stabilize prices.

As we enjoy the Victoria Day long weekend many will start to plan summer vacations which will undoubtably include camping, driving to new places, or flying out of the country. All of this will be impacted by the price of gas.

(As are so many other things such as pizza delivery, getting your new bike shipped, mowing your lawn - though we should all be using push mowers or electric by now!)

Though how high gas prices impact behaviour has been polled and studied many times, it may be the constant cycle of it that is wearing people down.

Analysis from the University of Michigan's Transportation Research Institute shows higher gas prices are having an impact on buyers' choices.

"Consumers are more interested in hybrids, plug-in hybrids, and fuel-efficient gasoline cars and less interested in large cars and light trucks," said the university's chief auto analyst Walter McManus

"Once again the market is giving us irrefutable evidence that fuel economy and fuel prices matter to consumers."

Do they ever.