To the Editor,
Re: Oil industry gouging willing consumers, Letters, March 5.
Writer D.F. Connors is correct by by inferring that there is no direct correlation between the price of crude oil and the retail price of gasoline.
However, his statement that the oil companies are unconscionable in the pricing of gasoline to the detriment of consumers is completely without foundation.
Connors shows that he does not understand some basic principles of economics dealing with supply and demand.
Multi-billion dollar investments in refineries are required to convert crude oil to gasoline. By reducing the refinery capacity, supply is curtailed and gasoline prices rise irrespective of the price of the crude oil.
During the 1970s, an excess refinery capacity existed which resulted in over supply of gasoline and caused price wars and very low profit margins for the gasoline refining and retail market.
Lately, some refineries have closed. These closures have brought supply and demand more in balance. Moreover, this supply balance has resulted in improved profitability for the industry and its investors.
Connors may not realize it, but most Canadians are indirectly investors in the oil and gas industry. Profits from the industry are reinvested and paid out as dividends to shareholders.
A prominent shareholder is the Canada Pension Plan. Without a healthy and profitable industry, pension funds will not be able to provide the income expected by many retirees.
If Connors and like-minded consumers do not like the price of gasoline, they can do the following: walk, ride a bicycle, or acquire an all-electric vehicle.
Moreover, if the price of gasoline is too high for their liking, import the oil and gasoline from offshore and develop your own retail market.
For as little as $1 billion, Connors can build his own refinery. But, that will bring out the NIMBYs.
Anthonie den Boef
Nanoose Bay