Peak oil and your wallet

If you have concerns about the price of oil these days, you’re not alone. With oil at $135 a barrel and rising daily, you are witness to a major life-altering event in the world economy – peak oil. Diesel fuel is now at $1.52 a liter, roughly 23 cents higher than regular gas. The high price of fuel in Europe over the years has led to the greater use of diesel engines in their new vehicles, in turn causing a greater demand and now a higher price.

A typical barrel of oil provides 73 liters of gas and 29 liters of diesel as well as other products. European refiners ship their excess gas to North America.

In New Brunswick, the total taxes on gas / diesel is 36 cents and 39 cents respectively, which is 27% and 25% of the total price at the pumps. The taxes consist of a federal excise, provincial taxes and HST of 13%.

If the price seems to be too high in Canada, you may want to try Venezuela where the price of gas is 3 cents a liter. A fill-up will cost you roughly $1.20. Hugo Chavez provides a subsidised domestic price, an off price break for friends such as Cuba and poor neighbourhoods in the US, but also sells at the world market price.
Saudi Arabia sells a liter for 12 cents. In England and France drivers pay $2.09 due to high taxes, with the Netherlands being one of the highest at $2.38 per liter. The tax policy is designed to stimulate energy efficiency in choices.

Stephen Harper weighed in on the debate this week saying that the federal government has no power to change world oil prices. He indicated that price relief would be limited to the existing cuts in the HST. For the average Canadian, this amounts to roughly $43 / year in reduced gas prices.

In another era, the 1961 national oil policy provided higher than world prices for Alberta producers while Eastern Canada had cheap Middle East oil. The policy ended in 1973 and after the OPEC oil embargo the government broke the link between the domestic and world energy prices giving protection to Canadian consumers. A further change was the National Energy Policy of 1981 following the second oil embargo. It appears that previous governments have reacted to public concern.

The present government is buying time for the status quo. Ultimately though, as the price of oil climbs to extraordinary heights, a number of things will happen. One, the value of the Canadian dollar will rise, perhaps to $1.15 US causing serious grief to industrial Canada. Secondly, the public outcry from gas at $2 or $3 a liter will force this government or its replacement to implement a number of steps to reduce dependence on oil.

Stephane Dion’s proposal for a carbon tax is the least of the worries facing the average consumer. The carbon tax is proposed as a revenue-neutral method to introduce a higher sticker price for carbon based fuel with the intended effect of increased efficiency of use and reduced greenhouse gases. Income taxes would be reduced to compensate for the change.

Prime Minister Harper portrays this as a tax grab. Very indirectly, he indicates that peak oil is here saying, “the world is using low-cost hydrocarbons more quickly than most people are aware.” Is there some information that you should be sharing with us, Mr Harper?

How are we to feel about a government which offers us no solution to the dangers of peak oil and an opposition leader who proposes a carbon tax, which is only a partial step towards a comprehensive solution? Would the words disappointment, sadness or anger describe our lost opportunities and money?

The price of inaction on oil conservation by world leaders has been astonishing. Oil consumers now pay $2.4 trillion dollars more than a year ago to oil producers. The additional cost to Canadians is $55 billion dollars per year or $1,700 per capita. That is equivalent to 10% of the federal budget.  Do you wonder why there is less money in your wallet?  The future will be even more expensive.

Stephen Harper is right to resist lowering the cost of energy as being short-sighted and counterproductive. There are many things that could be done to reduce our dependence on oil but our existing government has little interest in an effective off-oil and conservation program.  How long can we afford this type of incompetence?

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