On the afternoon of Sept. 22, a Thursday, several southern Ontario radio stations caused a minor panic among motorists by broadcasting reports, erroneous as it turned out, of a sharp spike in gasoline prices. According to these accounts, prices had jumped to $1.70 a litre in the Georgian Bay community of Owen Sound and an astounding $2.50 in the central Ontario city of Peterborough from just over $1 a litre.

Motorists immediately began heading for the pumps in the Greater Toronto Area and elsewhere. Service station parking lots became congested and, in some places, the lineups stretched half a block long. These days, Ontario consumers are more than just sensitive to rising gas prices. They're spooked, and the resulting transfer of wealth from Central Canada to the producing provinces, primarily Alberta, is bound to bring some old political demons out of hiding.

Consumers in Ontario and Quebec are already downright resentful, if not envious, of Alberta's good fortune and some public opinion polls show that a significant majority believe government should intervene. At least one prominent member of the Toronto-Ottawa-Montreal punditocracy - Chantal Hebert of the Toronto Star - has warned that Alberta's oil-driven fiscal might poses a threat to national unity.

Queen's University economist Thomas Courchene, one of Canada's foremost experts on equalization, agrees. According to Courchene, Alberta could start attracting more than its share of the best and the brightest from the rest of the country. It may be in a position to eliminate the provincial income tax and it could vastly outspend every other provincial health-care system, all of which he sees as detrimental to the national interest.



The implication is that something must be done and, with the resumption of Parliament on Sept. 26, Her Majesty's Loyal Opposition added its voice to the din. There was Conservative Leader Stephen Harper during Question Period on Day 1 of the new session asking the prime minister why the government was not providing relief for consumers by reducing gasoline taxes.

Harper's point was that Ottawa, and not Alberta, should come to the rescue of the public. It is a safe bet that in coming months, the Liberal caucus, consumer groups, constituents in Liberal ridings, the NDP and other left-wing groups will also be demanding government action. But they will see Alberta and its oil companies as a cash cow waiting to be gored and plundered.

The big question is: How will Paul Martin respond? An election is imminent. He is desperate for a majority. He will be sorely tempted to intervene by putting a lid on prices and taxing away Alberta's windfall, as Pierre Trudeau did in October 1980 with the National Energy Program. To do so would be disastrous, for several reasons.

First, it has been said, though not often enough, that no Canadian prime minister since Sir John A. Macdonald botched relations with the West as badly as Trudeau did. Macdonald's indifference toward westerners and their grievances led to the Northwest Rebellion of 1885. Trudeau's misguided and disastrous NEP nearly led to open rebellion in contemporary Alberta. Anything even remotely similar to the tax-and-revenue grab of 1980 would lead to a chasm between Alberta and the rest of the country that even divine intervention could not close.

Second, federal initiatives that cap the price of oil and tax away Alberta's wealth would have the effect of subsidizing private and public consumption elsewhere and cannot be justified on economic, environmental or ethical grounds. A made-in-Canada oil price would merely allow urban and suburban motorists in Ontario, Quebec and other regions to continue driving monstrous gas guzzlers such as Hummers, Escalades, Yukons and Dodge Ram 3500s, rather than ditching these heaps for more modest, environmentally friendly vehicles.

New energy taxation would give more money to an already profligate federal government that is awash in revenue and surpluses and allowed program spending to grow by 15 per cent in its first budget. Or Ottawa would pass the money on to the have-not provinces such as Quebec, which currently uses wealth transferred from Alberta and Ontario to maintain the lowest post-secondary tuition fees in the country, to operate the most generous day-care program in the country and to keep more than 10 per cent of its population on social assistance.

Finally, history has shown time and time again that governments cannot outsmart the markets, though the central planners in capitals as diverse as Beijing, Havana and Ottawa never seem to learn.

The NEP was a classic case of such planning gone wrong. It rested on the assumption that energy prices would continue to rise. It anticipated $80-a'-barrel oil and a revenue windfall large enough to satisfy government and industry.

In fact, by the time Brian Mulroney's Progressive Conservative government began dismantling the program in 1985, prices had begun to fall and would continue to do so for at least a decade. Furthermore, investors fled the oilpatch in the wake of the NEP and its confiscatory measures.

Overnight, Alberta went from an unprecedented boom to the deepest recession since the Dirty Thirties.

Paul Martin won't be able to use health care as an issue in the next election, having played the part of medicare's saviour last time around. He and some of his advisers will undoubtedly see an enormous opportunity in rising energy prices.

By posing as the consumer's protector, he could split the Tories, pit Ontario and Quebec against Alberta, and cruise back to 24 Sussex with the majority he needs to assure himself a place in the history books.

It will be enormously tempting. If he succumbs, he will be guilty of playing cheap and cynical politics and will put the unity of the country at risk.

If he resists, well, perhaps the man has more wisdom and courage than he's demonstrated to date.

(D'Arcy Jenish can be reached at jenish@businessedge.ca)