The invisible hand of the marketplace is blind to hardship

If you ignore the hardship to Canadians caused by the rising cost of heating homes with natural gas, free enterprise is a great success story.


A recent report from the National Energy Board puts it this way: “the natural gas market has been functioning so that Canadian requirements for natural gas have been satisfied at fair market prices.”  The invisible hand of the marketplace is blind to hardship.

Deregulated natural gas prices have brought windfall profits to gas producers, and to governments in the producing provinces of Alberta, B.C., and Saskatchewan.  The lion’s share goes to Alberta with 83 per cent of all Canada’s natural gas, followed by B.C. at 12 per cent and Saskatchewan at 4 per cent.

B.C.’s natural gas was once a public utility, like our electricity now is.  That all changed on 31 October 1985, when the Social Credit Government of British Columbia, along with the Governments of Alberta, Saskatchewan, and Canada,  signed the Agreement on Natural Gas Markets and Prices.

From that time on, we were thrown to the whims of the marketplace. Natural gas was no longer a utility — a publically resource — but a commodity to be traded on stock exchanges.  Pipelines were built to move this commodity to the United States.

Although the use of natural gas in Canada is primarily for heating, in the United States natural gas is increasingly being used for the generation of electricity.  The popularity of gas fired electrical generating plants is easy to understand.  The electrical plants are relatively cheap to build and they are virtually non-polluting.

And the demand for electricity is growing rapidly – –  faster than any other energy source.   In our increasingly high tech world, the use of computing equipment,  electrical appliances, air conditioning, telecommunications, home entertainment systems, cordless phones and the like, have all increased.

So guess what happens when there is an unusually hot summer, like last year,  in California?  To keep cool, Californians turn up their air conditioners.  Electrical generating plants buy more natural gas to supply the demand.  Increased demand drives the cost natural gas up.  As a result, we pay more to keep warm so that Californians can keep cool.

To add insult to injury, we end up buying our own natural gas at inflated prices, with 67 cent dollars. It’s a perverse example of a value added resource.  Natural gas is exported to the United States where it is marked up, and we buy it at American prices.

Canada supplies 25 per cent of all North American needs. Most of it comes from the Western Canada Sedimentary Basin which stretches from northeastern B.C., through central Alberta, and southeastern Saskatchewan.  We have more than enough natural gas to supply our own needs.   If natural gas were regulated like B.C.’s electricity is, we would be paying the lowest price in North America.

But that isn’t going to happen.  Once a utility is deregulated, privatized, and sold to the highest bidder, the price of that energy source is out of our hands.  And that’s the way politics is going.  Whatever big business wants, big business gets. For example, the Canadian Manufacturers and Exporters Association wanted, and got,  a trade agreement with the United States ensured that our cost for natural gas was linked to what Americans will pay.

Privatization of our natural gas utility has not provided the lowest cost to consumers — public utilities such as B.C. Hydro have.  Utilities should be a public service, not a commodity.  In addition to serving the owners of the resource, utilities are the engine of our economy.  It’s impossible to have a made-in-B.C. industrial strategy when our resources are controlled by others.

You might think that the high cost of natural gas would cause free enterprisers to despair. But remember, what’s bad for consumers is good for natural gas producers.  Entrepreneurs hope to recreate this success story with water.

Canadians now rightfully think of water as our heritage.  Entrepreneurs see it as a valuable commodity.  They want water pipelines built to the United States, and sold on the open market.  We won’t be able to afford to buy our own water once it is commodified. The marketplace is not concerned a whit if we are cold and thirsty.


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