Gas Price Insanity! The debate maddens me...

Today’s blog asks some questions about Gas Prices.

My question's are:

"Do you support Higher Gas Prices at the Pump"

"Do you support higher Transparency in Energy: Oil, Gas, Electricity and Taxes"

"Is Higher Gas the Inconvenient Truth or the End of Suburbia or both"

"Would you support a ban on interviews conducted with people who just filled their tank?"

There are many more to be asked. As you may be able to tell, I believe that we still get a great deal in Canada and the US when it comes to Gas Prices and Gas Taxes. Actually, that's not really opinion but fact. Compared to Asia and Europe, we get a bargain at the Pump. We also pay more for Milk, Coca-Cola, Coffee and bottled Water. All of those products also depend on Cheap fuel to be manufactured and brought to market. The documentary 'The End of Suburbia' laments the death of the $5 Caesar salad. 

There are a number of factors that create confusion and frustration: In the 70's there was a scare of shortages. Then for 30 more years we had cheap Gas. What gives? There is a lack of transparency at the pump. Remember those stickers that told you where your Gas dollar went? I don't think they're there anymore. Few people know accurately how much they pay per mile, how much they consume, the cost of their travel (there are many externalities in Transportation) or the subsidies they receive to drive - people still erroneously believe they pay the full cost of private travel or that road capacity has no cost.

We are told by industry groups that there is enough Oil and Gas in North America for the next 60 years if we just drill it but people like T. Boone Pickens also say that this is not the sole answer and that we must immediately start converting cars to clean Natural Gas. Industry Lobbies also pay millions to convince us and our legislators of their case. And Al Gore and David Suzuki tell us we certainly can't wait to start the move away from Carbon-based fuels given the Climate Change crisis - nor is it sustainable environmentally, economically, socially to continue the way we have.

No one likes prices going up. However, populist politicians are now spouting things like: The spike in Gas is as much as we paid for Gas in the 1970's. Well, inflation alone has meant a huge increase in the value of our dollar in the last 30 years which deflates this argument pretty quickly - in Real Dollar terms, its not that large a spike. But politicians are like Movie Theatres - every new release has to be the biggest ever regardless of inflation! Are we stupid for buying these politicians or are we simply pavlovian dogs wagging our tongues and drooling when they fight Big Oil?

I haven't even begun to talk about how cheap gas has subsidized suburban sprawl which in turn has made most of the complainers totally dependent on cheap gas. I guess, someone told these people at some point that Gas would always be cheap and there was some guarantee of a good life and a right to drive in the passing lane at all times. Parking should be free too right? Any amateur economist (myself included) can tell you the first rule of economics is that there are NO free lunches!!

Further complicating this debate the fact that we in Ontario have under-invested, perhaps even de-invested in Transportation for 30 plus years and that we have massive needs for new infrastructure and it becomes even more fun. Most public opinion surveys will tell you this: voters prefer user fees over general tax increases. Therefore, to increase road repair, increase public transit (which benefits drivers and trucks) we must draw even more from drivers, not less. At the same time, the public demands transparency in funding systems, reduction of gridlock, better road maintenance and fairness.

Every day there are media stories about record prices - and yet demand is still going up. We live in a free market economy but even if we didn't, we'd still have to deal with the natural economic laws of supply, demand and equilibrium price. We've seen gas sell out when the price was low. We still see line-ups as price goes up. There has been an increase in North American transit ridership but since we are allowing it to happen to us we have not pre-invested in public transit to accommodate new capacity.

However, here is where some of our Federal and Provincial politicians are also slightly dishonest with us. Gas Tax revenues (those that aren't flat per litre excise taxes) go up with the price of Gas as do Corporate Income Taxes (unless they enjoy loopholes and shelters.) So the government should be able to invest in alternatives that get people off of their addiction - kind of like the concept of legalizing and taxing drugs to pay for treatment programs!!! These would include alternative fuels, conservation, public transit, ride-share incentives, etc.. After all, we all pay for our roads through property taxes whether we own a car and drive it every day or sit at home and watch TV. 

I don't have all the answers. I do love debate. If you have ideas, please share them politely. I know this is a hot issue and hits many people in their emotional strike zone - their wallet! I am lucky but have also made a choice to live in a neigbhourhood close to downtown and to drive less than 400k/month. I know others might not be so lucky. Please share any info you have about Oil and Gas, about the amount of refining capacity in North America, about how much you pay per km for roads, insurance and gas, and any other info and opinion related to this topic.