Gas prices and the environment

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.