Two cheers for high gas prices

I cringe every time I fill up my car at $1.321 per litre, but there is a pretty bright silver lining:

Black gold is filling tax coffers as crude oil prices surge, notes Calgary-based energy consultant Michael Ervin - and the higher prices may persuade more consumers to buy fuel-efficient vehicles.

"The real benefits economically really do relate to the government revenues derived from it," he said.

"Not only directly in the form of royalties, but indirectly through income taxes on a working population that work in this industry."

One need only look east, to Newfoundland and Labrador, to see a province that has benefited from resource royalties.

The price of crude largely fuelled a provincial budget surplus Tuesday of $544 million. Next year will also mark the first time since joining Confederation that Newfoundland will not receive equalization payments.

[...]

Other provinces, such as Quebec and Ontario, get hit with the triple whammy of a higher Canadian dollar, soaring energy rates and high commodity prices. However, Ontario automakers could stand to gain from manufacturing more fuel-efficient vehicles.

Mark Nantais, president of the Canadian Vehicle Manufacturers' Association, says countries with high fuel prices tend to have more fuel-efficient cars, which presents market opportunities for Canadian automakers - not to mention the environmental benefit.

"There's many different things that results from the price of fuel," he said. "One is people, because they have a set transportation budget ... they will buy a more fuel-efficient vehicle."

But determining whether consumers change their driving or vehicle purchasing habits in the face of higher gas pricier is difficult because there have been few studies on the subject.

I don't think it will change Canadians' driving habits, as much as it will influence us to buy smaller, more fuel-efficient vehicles next time around. General Motors, not coincidentally, is cutting back full-size truck production this year.

In the United States, meanwhile, I can't say I'm surprised to see Hillary Clinton promoting a gas-tax holiday for the summer. But I am disappointed to see John McCain jumping on that bandwagon - and impressed with Barack Obama's refusal to join in:

It is great to see that we finally have some national unity on energy policy. Unfortunately, the unifying idea is so ridiculous, so unworthy of the people aspiring to lead our nation, it takes your breath away. Hillary Clinton has decided to line up with John McCain in pushing to suspend the federal excise tax on gasoline, 18.4 cents a gallon, for this summer’s travel season. This is not an energy policy. This is money laundering: we borrow money from China and ship it to Saudi Arabia and take a little cut for ourselves as it goes through our gas tanks. What a way to build our country.

When the summer is over, we will have increased our debt to China, increased our transfer of wealth to Saudi Arabia and increased our contribution to global warming for our kids to inherit.

No, no, no, we’ll just get the money by taxing Big Oil, says Mrs. Clinton. Even if you could do that, what a terrible way to spend precious tax dollars — burning it up on the way to the beach rather than on innovation?

The McCain-Clinton gas holiday proposal is a perfect example of what energy expert Peter Schwartz of Global Business Network describes as the true American energy policy today: “Maximize demand, minimize supply and buy the rest from the people who hate us the most.”

Good for Barack Obama for resisting this shameful pandering.

But here’s what’s scary: our problem is so much worse than you think. We have no energy strategy. If you are going to use tax policy to shape energy strategy then you want to raise taxes on the things you want to discourage — gasoline consumption and gas-guzzling cars — and you want to lower taxes on the things you want to encourage — new, renewable energy technologies. We are doing just the opposite. (via InstaPundit)

Damian P.

Posted by damian at April 30, 2008 12:10 PM