For those of you who were wondering, I was doing some brainstorming on the subject and hit "Publish Post" by mistake. Oh well, there goes the element of surprise.
People here and, frankly, everywhere else have been complaining about high gas prices for years. To be honest, it's a valid complaint. More recently, of course, have been the concerns surrounding the so-called "greenhouse gasses", and the various effects of them on the environment. I think that there may be some ideas that would improve both situations simultaneously. Some of these ideas are very short term - essentially "quick-fixes". Some of these ideas may take more time. Either way, I'd welcome any input.
First, let's look at the economics of the subject. Gas prices at the pumps are determined by four factors: the market cost of crude oil; refining costs; taxes; and profit margins for the various people who are involved in getting the oil from the ground, and into your gas tank. Some aspects of this cost can't be directly affected through government action. Some aspects can - namely the taxes, and the market cost. The market costs can be achieved through influencing the supply/demand curve - namely reduce the demand, at the same time as increasing the available supply.
Step one: increase the overall available supply. Canada is in an interesting strategic situation, as having the second largest oil reserves in the world after Saudi Arabia. Unfortunately, the majority of those reserves are in the Alberta oil sands - with a cost of production of up to $40/barrel. In comparison to the production costs of $10/barrel or less in Saudi Arabia, Iraq, and other conventional drilling locations, this is pretty high. That said, with the market cost currently sitting around $100/barrel (pre-refining cost), there's enough of a difference to increase production somewhat and maintain a hugely profitable operation. Furthermore, the increased production should lead to an increase in jobs in the market. The other factor in the market cost of oil are political factors - essentially, issues taking place overseas - most notably in Venezuela and the Arabian peninsula - are impacting the cost that we're being charged for that oil. Ramping up production in our own reserves, and simultaneously increasing refining capabilities here would enable us to not be reliant on imported oil - thus making us invulnerable to the political factors that have caused the issues in the oil market, and, long term, would enable us to compete directly with OPEC in that market - and, potentially, profit immensely in so doing.
Step two: reduce domestic oil consumption, which serves the dual purpose of keeping prices lower, and reducing our greenhouse gas emissions which, regardless of your position on global warming specifically, definitely improves the quality of our air. To reduce our total oil consumption, there are two factors to consider: energy production, and transportation. Energy production is a bit of a tricky question - ultimately, the Federal government has limited control over the energy policies of the provinces (constitutionally), so there is no sure policy that can be set. That said, encouraging the provincial governments to (long term) convert their existing coal-and-oil burning electric plants to nuclear and/or hydro-electric (where the capacity exists) could be decidedly helpful. Obviously, this change-over will cost tax dollars, however will also create large numbers of reasonably well-paying jobs - leading to an increase in overall tax revenue both in the form of income taxes, and the sales taxes on the increase in retail spending.
The question of transportation has a few other factors. Ultimately, people need to get from point A to point B, and they generally need to be able to do so with a certain degree of speed and comfort. Generally, people prefer to use cars. Buses are uncomfortable, and trains are generally expensive. It's common knowledge that different cars, different engines, and different grades of gasoline offer different levels of fuel efficiency. Increasing the total fuel efficiency of vehicles, overall, will reduce the total gas consumed, and also reduce the exhaust levels (per litre), thus reducing emissions as well. Furthermore, roughly 1/3 of the cost of gas at the pumps is in the form of taxes. People have always had the option to choose to buy higher grade or lower grade gasoline, and most people use the lower grade because it's cheaper in per litre cost. Perhaps we should change the tax structure on gasoline to give people a reason to buy the higher grade (and therefore more efficient and cleaner burning) gasoline.
Anyhow, those are some ideas I've been thinking about. I honestly don't know if they'll work or not - this specifically isn't one of my areas of specialty. So if anyone has any comments (positive or negative), some ideas on how to make my ideas better, or some ideas of your own that I may not have here, please let me know - I'm always happy to listen.
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15 comments:
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Looking forward to a debate I can weigh in on ... :P
Oh shit, I hadn't intended on hitting the "publish" button. Oh well, now that you know what's next on the agenda... lol
I'll go through your points in order:
There is only so much the government can do to increase supply. The best way I can think of would be federal tax breaks to the drilling companies to increase production and to setup refineries. But unless I'm mistaken, pump prices depend more on global supply/demand curves than local ones, so I'm not sure how much effect this would have.
As much as personally I love the idea of decreasing our dependence on coal and oil and moving to wind, solar, hydro and nuclear power sources, the latter (which I feel is our best option) sparks community debate as it stands. Is it realistic to expect the public to welcome the addition of, say, 15-20 new nuclear facilities? We might consider increasing our spending to ITER instead (link.
I really like the idea of tax breaks on higher quality fuel, but I think that it hardly even qualifies as a stop-gap measure. Improved public transportation systems are perhaps the best solution, particularly since as technology improves it is far easier for public transportation to be upgraded. Could the federal government enact legislation requiring certain standards in public transportation? The difference in quality of the bus systems in, say, Fredericton vs. London are astonishing.
Looking at ITER as we speak - I think that this definitely speaks of promise, however even according to them, fusion as a viable source of energy is "at least 50 years away from commercialisation". I definitely think it's an investment to look in to for the future, but it is not a solution for the present.
As for the question of public transportation - again, good idea. There are a couple of concerns, however. First of all, There is the question of jurisdiction - specifically, the federal government only has jurisdiction over "ships, railways, canals, telegraphs, and other works and undertakings connecting the province with any other or others of the provinces", as well as ship lines, and such works "declared by the Parliament of Canada to be for the general advantage of Canada or for the advantage of two or more provinces." (Constitution Act, 1867)
Public transportation systems simply do not fall under federal jurisdiction, and interference in that aspect of things would likely broker a great deal of resentment from provincial governments. That said, an inter-city rail-system would, in some areas, be a solid investment and can, reasonably, come under the jurisdiction of the federal government.
As for changing the supply/demand curve for the cost of oil - really, that depends on how much we extract, and what we put it to use for. The fact is that if we are able to produce enough oil, and expand our refining capacities, then we can, in theory, cease importing oil all together, and thus enabling us to essentially become a market unto outselves. This is the same effect as what OPEC does, and allows it to maintain gas prices far, far below the global average - essentially creating two markets - producers, and importers. I seek to put us in the former market.
In the question of jurisdiction, why does the federal government need to legislate? Should it not be possible to bring together the provinces, make them an offer to accomplish your goals, and see what they do? "I'll give each of you 50 million to implement this policy!"
This is true - and definitely worth considering. The other significant question to ask is "what would make people want to take the bus?" - because right now, it definitely isn't a popular option.
Even higher gas taxes!
Why would we want to do that? Gas costs too much already anyway. Increasing the taxation levels on it to try to force people to take the bus really isn't a very good solution.
I like what the TTC has begun doing - making their weekly passes tax deductible. I'm a huge advocate for public transportation as long as it's time and cost efficient, and really, besides aesthetic and status, I can't think of why anyone would drive in Toronto, given the alternative.
In the Dominican Republic, the elite of Santo Domingo flaunt their wealth by driving massive "jeepetas" (SUVs) - a powerful status symbol in a country where gas costs US$4 per gallon. To me, this is the height of antisocial behavior, especially as it is undertaken willfully, in full consciousness of the crippling systemic poverty in which 80% or more of the population lives.
Regardless of your opinion on global warming, Tucker has a point - the ability to breathe clean air, to be outside in an urban environment for longer than 30 minutes without feeling ill is a right to which all members of civil society are entitled. To consciously contribute to the problem when workable alternatives are available is antisocial behaviour - and to complain about the results is hypocrisy. Since nobody likes to think of themselves as hypocritical and antisocial, we need to turn our own inherent self-consciousness to the advantage of society and make civility trendy. Public transit is probably the easiest starting point.
It's clearly cheaper to take public transit for a year than to try to insure, fuel and maintain a car for a year. With frequent service, it's certainly faster than sitting in traffic. Public transit follows the same supply and demand relationship as any other commodity or service. With increased demand for frequent service should come an increase in the frequency of service with little perceptible difference in cost, particularly if the public transportation is partially publicly funded. (I'm expecting people to point out several flaws in my economics. I can't do fourth-grade long division so I've left it purposely open-ended.)
It's not as comfortable as driving, and drivers always give the excuse that it's not as "fun," but that's because we're all used to being constantly entertained and distracted and amused. Bus/train/streetcar time is prime reading time - newspapers, novels, high-brow academic tomes ... or staring-out-the-window time. Or talking-with-your-commute-savvy-friends time.
Or if you must cling to your damn automobile, carpooling helps the environment and puts a little more gas money in your pocket too.
I just think the government has to legislate against transit selfishness. An example I floated last year was making it illegal to drive distances of less than ten kilometers. I don't know how you'd enforce it, but that's the general idea I'm getting at. Make it illegal for any single automobile to have less than two passengers during established "rush hours."
Force municipalities to establish bike lanes and improve the safety of public spaces like parks and trails for passage at all hours of the day.
I'm tired and scattered now.
Alex - your economics on public transit are essentially correct, except that the powers that be might decide to simply keep supply constant in light of increasing demand for the purposes of achieving higher profit margins.
The question of not being comfortable is decidedly true, as is the question of being less convenient. (To give you an example, I wait an average of 10 minutes to get the bus from my house to the mall. In those same 10 minutes, I could have been AT the mall had I my own vehicle).
Other issues: forcing people who do (either by choice or by necessity) drive to carpool during rush hours is a violation of the right to free association (which includes the right to not specifically associate with anyone).
The question of public intra-city transportation also in no way falls under the jurisdiction of the federal government. While an effort to improve public intra-city transportation could achieve positive results, it doesn't fall under the pervue of federal government.
"forcing people who do (either by choice or by necessity) drive to carpool during rush hours is a violation of the right to free association (which includes the right to not specifically associate with anyone)." - Just change the constitution. Chavez did it, so can you :P
Just kidding. It IS hard to legislate, but it would make such a huge difference if it could be accomplished. Back to the Batcave ...
Yes, I know Chavez changed the Venezuelan constitution. He's also a deranged dictator. I have no intentions of changing the constitution here for the sake of forcing people to carpool. What, exactly, is the batcave?
Omg, Tucker, you'll never guess who I just ran into ... Your sense of humour! It wanted to know if you've been missing it.
:P
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