Monday, 19 May 2008

Gas prices keep climbing, and Canadians continue paying for it

It seems that Canadians pretty much are got used to high gas prices by now. Americans have been scared by the gas prices steadily climbing towards $4 per gallon, with the country average having passed the $3.75 mark for the regular gas lately. Meanwhile, Canadians are already paying over $4.60 per gallon, in part thanks to Canada's federal and provincial governments which have been silently robbing people with the excessively high average combined tax rate on gas.

Facing taxes on final fuel prices, gas wholesalers and retailers in Canada shamelessly (and I have to admit, quite rationally from the economic point of view) shift the total burden of those taxes to Canadian consumers who, for some strange reason, are content with the situation and have been paying whatever price they see at gas stations. I mean they complain too, but do it unofficially at home and in private conversations, and I do not see any material outcomes of these complaints. I never heard anybody publicly debating and questioning federal and provincial beaurocrats why, say here in Ontario, the federal and provincial governments have been running huge surpluses for several years in a row now, yet they continue working in a close tandem with gas producers and distributors to deliver the outragenously high prices for gas to Canadian consumers.

Again, I understand the economics of such behavior, since sellers and tax authorities would love to charge the highest economically feasible price/tax for the good with the inelastic demand to extract the total economic surplus from the average consumer. But at the same time I think this is an example of a huge hypocricy where government officials express their seemingly genuine concern about consumers (yeah, right!), yet do the opposite things that hurt the latter. I do not even comment here about gas producers, refiners, wholesalers, and retailers since this gang is one big collusive ring that cares about nobody but their own profits (and the profits of their financial Masters). Add Western governments, which are also largely a part of the big spiderweb scheme, and you get the fuel and energy markets and prices acting as one of the important links in a now almost global chain that keeps the majorty of people in long-term economic slavery. This is another story though...

Back to gasoline pirces in Ontario and Canada: Look at the comparison of gas taxes in Canada across provinces, presented at Well, according to this info, the price that the average Canadian fellow is paying for regular gas in 2008 includes 35% in combined provincial and federal taxes, in comparison with 20% in taxes that the average American dude pays. For example, the residents of Ontario pay C$0.10 per litre in the Federal Excise Tax, $0.147 per litre in the Provincial fuel tax, plus a 5% GST (the federal sales tax). What's particularly outrageous is that GST is charged on the full gas price inclusive of the excise and fuel taxes. It is a tax on a tax which effectively increases the 5% GST rate by almost 1.5 percentage points to 6+%. Nice, isn't it?

The federal excise tax on fuel has increased from 1.5 to 10 cents per litre over the last 20 years. The latest such increase from 8.5 to 10 cents per litre came more than ten years ago as a temporary deficit reduction measure, which Ottawa's fricken government amnesiacs conveniently forgot to remove despite the fact that they have been swimming in surplus money for several latest years in a row.

The proponents of such taxes argue that fuel tax revenue is spent on public infrastructure, public transit, environment, and all other public programs that one can link to the use of fuel and cars, related pollution, etc. I understand it and see some truth in this argument in principle, but do not get me even started here about how these revenue funds are spent in reality. As an economist who used to deal with Canadian government stats, I know that this revenue money was not and is not spent properly and fully on what it has been originally claimed to be allocated to.

You can say that gas taxes are even higher in Japan, UK, EU, and other countries. I do not care. I live in Canada, which is one of the world's not so numerous oil producers and exporters, largely thanks to Alberta's Oil Sands. And there are economic means and controls in an oil-producing country to make sure that provincial economies and Canadian consumers remain competitive and protected from the negative consequences of the spreading international economic crisis and a fuel price bubble. So far, I can only see empty rhetorical words from politicians who keep pumping gas-based tax revenues from Canadian firms and individuals.

The gas price was $1.248 per litre today. You can check the latest gas price trends at this page. The gas prices in Canada closely move with the price of oil. Because energy markets are quickly becoming a new bubble toy for speculators of all shapes, colours, and sizes, it looks like we are likely to see gas prices going further north for a while (despite an occasional correction here and there). And it looks like Canada's central and provincial governments will (unfortunately) be there too to enjoy increasing revenue proceeds from growing fuel prices.

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