Thursday, May 20, 2004

It's a gas

By now, the upcoming election is the worst-kept secret in the country -- we may only have a little over a month for the official campaigning, but it seems as though pre-election campaigning has been going on for months now. One of the many signs: decreased levels of rational thought on gas prices.

Yeah, the price of gas doesn't really tend to stimulate a lot of thoughtful discussion at the best of times; any media or public discussion tends to boil down quickly to simply blaming the governments, local gas station owners, the big oil companies, or OPEC countries (take your pick) for "outrageous rip-off" prices at the pumps. Lately, though, it's taken a new tack:

  • Stephen Harper: "Taxes are bad. Too much tax on gas."
  • Paul Martin: "Health care needs money!"

Two very simple opposing positions, aimed at the lowest common denominator, and a back-and-forth that reminds me of a Simpsons episode (Principal Skinner and Edna Krabappel were debating school funding, I believe). The funny thing is, that seems to be reflecting what I hear in the news, on the radio stations, and elsewhere around here; in one mailing list I am a member of, a major (off-topic) heated debate came up, where it became clear to me that suddenly there is a lot of pent-up rage over gas taxation.

Hence Stephen Harper with what appears to me as a rather opportunistic proposal to give Canadians "tax relief" on gas prices (that's not to say that Finance Minister Ralph Goodale's health care fund rebuttal wasn't equally opportunistic!). From the Globe and Mail:

"A Conservative government would axe the tax on tax. We will end the GST charges against federal excise taxes," he said, adding that the measure would cost Ottawa $300-million a year.

For perspective, here's where your gasoline dollar goes. Living in Ontario, I'll use that example, although generally it's similar across the country, with a cent or two more or less per litre on the provincial taxes, and a couple of local transit taxes:

  • Base price of gas (e.g., 40c/L)
  • Federal gas tax: 10c/L
  • Provincial gas tax: 14.7c/L
  • Applied to all of the above, 7% GST

So, let's see — if you no longer charge 7% GST on the federal gas tax (as Harper says, "Axe the tax on tax"), you'll save: a whopping 0.7c/L.

More, from the same article:

Mr. Harper said his party would also remove the GST on the portion of gas prices above 85 cents a litre. Mr. Harper said this move would not affect the federal bottom line because no one foresaw the recent rise in prices.

If the price of gas were $1 a litre, the two Tory measures would save consumers about 1.75 cents a litre .

Again, if the price of gas is up to $1 per litre, a cent or two isn't going to make that much difference. The volatility of prices right now is so great that you can find a greater difference between stations, anyway.

The public are suddenly clamouring for the federal government to lower gas taxes, but of the 20-cent-or-so spike this month, only a cent and a half or so is actually attributable to taxes — the 7% GST applied to the extra 20 cents. The actual gas taxes themselves haven't increased — they're charged on a per-litre basis, not on a per-dollar basis. I think that's been lost on complaining drivers; I get the impression they think gas taxes are charged based on the price at the pump. (Petro-Canada used to have a sticker on their pumps — they may still have them — showing where your gas dollar goes. Rather than the bar chart in the link shown above, it was a pie chart, which can't help reinforce the notion that gas taxes are a constant percentage of the price of gas.)

If gas taxes weren't causing uproar and revolution back in the 60-cent days, why should they now in the 80- or 90-cent days when they haven't changed? I don't like the higher-priced fill-ups any more than anyone else, but, really, to me this appears to be a matter of supply and demand, something that we're going to have to get used to eventually anyway. The blessing of the high prices may be if drivers see this as a being part of a long-term trend and not just a blip they can wait out, and make a decision to adjust their driving and vehicle choices accordingly. A TV news spot I saw near the start of the price spike talked with car dealers and prospective buyers, and for perhaps the first time there seemed to be a lot of talk about whether we should be reconsidering the trend towards ever-increasing vehicle sizes, and looking more to hybrid vehicles. On a more long-term basis, it would be interesting to see if this does anything to ridership on the TTC, GO, and other transit agencies — will people do anything about their level of gas usage other than complain about the prices?

With that, I will sign off, recalling wistfully January 1999 in Moncton, where suddenly in the midst of long string of gas prices in the mid-60's, a rare price war (prices out there seem a lot less volatile than in southern Ontario) lowered it all the way to 35 cents per litre...

[UPDATE: Forgot to mention that James Travers takes a similar position in the Star today.]


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