I believe in free markets—in their place. That place is when they best serve the public good. And most of the time they do just that. But not always. In regard to any service, whatever type of market that best serves the public good is the one that should be used.

If the goals are simply quality and price, free markets are usually the best approach. But sometimes there are other, more important goals. With health, for example, a primary goal is good care for everyone. A free market would provide first rate care for the rich and third rate or no care at all for the poor. So we sensibly reject a free market in favour of a universal, publicly financed system.

Occasionally, a free market doesn’t even provide the best price. For example, universal government-run monopolies for automobile insurance have proven lower cost than the private market. As a result, a number of Canadian provinces have opted for that approach. And services such as water and sewer are more efficient with one provider, i.e. a government monopoly.

Sometimes a mix of approaches best meets the goals. For example, in a democracy, reliable news and a range of views is of primary importance. Private providers of mainstream news are corporate owned and the corporate sector has its own agenda. To ensure balance, therefore, we supplement the private sector with an arms-length broadcaster, the CBC. The national broadcaster also provides a stage for Canadian stories and Canadian talent to develop, a worthy goal not adequately met by free market outlets.

Nonetheless, free markets are the choice for most of our services and serve us well. And no doubt a free market would have been the best choice for the oil industry, but it never has.

Until the 1970s, the oil industry was dominated by the infamous Seven Sisters. The seven largest oil companies operated as a cartel, making arrangements among themselves from production to refining to sales that benefitted them a great deal more than a free market.

In the 1970s, the power changed hands. The Organization of Petroleum Exporting Countries (OPEC) realized that as they owned the oil, they could control the market. By turning the taps on or off, they could set the price. Once they began to flex their muscles, prices soon doubled, then tripled and within a decade had risen ten-fold. OPEC, today OPEC+ with new associates, isn’t the power it once was, but it can still push prices around.

This was a very good thing for Canada, especially for Alberta, the main owner of our oil and gas reserves. This is what made Alberta rich, the province of “blue-eyed sheikhs.”

What to call this market. A cartel market? A monopoly market? A government-involvement-in-the-marketplace market? To a free market fundamentalist, it would be an illegitimate market, an artificial market, certainly not a free market.

In a free market, the price of a product approaches the costs of the most efficient producer plus a reasonable profit. The cost of producing oil in Alberta is around $40 per barrel. The costs for OPEC members such as Saudi Arabia, Kuwait and Iraq are around $10 per barrel. In a truly free market, prices would tend toward the latter. Yet the world oil price hovers around $60 per barrel. Without the machinations of OPEC to maintain artificially high prices, we would never have had an oil sands industry, perhaps not much of an oil industry at all.

So as a believer in free markets, should I object to this artificial market? As an Albertan, indeed as a Canadian, I suppose I shouldn’t. After all, it has contributed to our public good, has it not? It has certainly contributed a very great many dollars in salaries, profits, royalties and taxes.

But did this betrayal of free markets ultimately serve the public good? Because of it, Alberta is very much richer, and much more populous. Without it we would be poorer and scarcer, more like Manitoba perhaps.

But there is nothing wrong with Manitoba, and without it we wouldn’t be plagued by thousands of abandoned oil wells, contaminated leases, and horrendous tar pits and toxic lakes. Most important of all, we wouldn’t be one of the world’s worst contributors to the world’s worst problem—global warming. We wouldn’t have made our deal with the devil: gaining great wealth in return for setting off the carbon bomb known as the “oil” sands.

In short, we might be living within our environmental means. And nothing is more important than that.