Gas Prices and Reality

With gas prices getting higher than a student on March break people are complaining more and more about being gouged by the big oil companies and the government. It is understandable that some people are taking this stance but is this the right one to take and is this really such a bad thing?

Firstly lets take the world wide look at prices. These prices are in US dollars and are per gallon and are as of roughly mid April.

Canadian is roughly $5.29 US
United Kingdom $8.27 US
France $6.50 US
Japan $4.16 US
US $2.88 US
Russia $2.68 US
Saudi Arabia $0.45 US
Venezuela $0.19 US

If you take a overall look at Europe, prices vary from the highest of $8.27 US to $4.27 for little Luxembourg. Different countries and governments take different amounts of tax. You also have to take into account that European countries have many more diesel vehicles than in North America with diesel traditionally being cheaper.

From the above list you can see that if you want to drive around all day in a big V8 engined, gas guzzler, the oil producing countries of Saudi Arabia and Venezuela are the places to be. Luckily in the United Kingdom, the average car is smaller than in North America, with a smaller capacity engine and therefore use less gas.

Using very rough math let’s compare gas per litre at $1.00 and at $1.40

60 litres @ $1.00 per litre per week is $60.00 which makes $3120 per year
60 litres @ $1.40 per litre per week is $84.00 which makes $4368 per year

The different per year is $1248 or $24 per week.

$24 dollars a week. That’s nearly a 24 of beer depending on what brand you drink. It’s approximately breakfast for four at McDonalds on a Saturday morning. It’s a brand new movie release on DVD. It’s a large joint of meat. It is a significant amount of money out of your pocket each week.

The government takes $7.68 of that money as taxes with $11.42 going towards covering the cost of the crude oil. These figures are from the Petro Canada website (http://retail.petro-canada.ca/en/fuelsavings/2132.aspx) and indicate that there is only a 3% profit on each litre of gas, which based upon a price of $1.40 means that on each litre, Petro Canada take just over 4 cents profit.

On facebook and email, there are campaigns to not buy gas on one particular day to punish the oil company or to boycott one particular oil company. Logically, if no driver bought gas on a Tuesday, on the Wednesday there would be more drivers having to buy gas, as drivers who would have filled up on Tuesday joined those would normally have to fill up on a Wednesday. Now that the numbers buying fuel has increased, how is that punishing the oil companies? The same amount of gas will be bought in a week, it would simply be the day to day totals that would suffer, not the weekly, monthly or yearly totals. Look at this from the ‘evil’ oil companies. If there was a countrywide boycott on a Monday, and the above scenario above of more drivers needing fuel on Tuesday came true, if I was an oil company, I would bump up the price by a cent or two, more profit for me! Boycotting gas stations doesn’t actually achieve anything, especially when the numbers who take part are normally very small.

Let’s look at another product that has increased in price in the last couple of decades. Cigarettes. How much more expensive are they now than in the 1970s? Yet, do you hear the outcry about the increase, or a proposed boycott? Of course not. If you smoke, then you smoke, it is either your choice or your addiction. Either way, you smoke and you pay the price you need to pay so that you can continue to smoke. Isn’t driving the same? You choose to drive to the shops, to go for a drive, or to do donuts in a parking lot. Your choice. You have to drive to work, to the shops. Consider it your addiction.

Another viewpoint is the role of the media. This week alone, if you had been listening to CBC news or even local radio, every single news broadcast, on the hour or whichever, talks about a rise of a cent on gas prices. Does it warrant a mention on the news? What about the on-going disaster in Japan? Is that not as or more important?

A favourite comparison that people like to use is how much it would cost to fill your gas tank with such liquids as bottled water, or champagne. Comparing apples to oranges is not a realistic proposition. Different commodities cost different prices to produce so why compare?

From personal experience, 12 years ago, I remember gas being $0.60 a litre,and it has now more than doubled. I now own a more powerful car with a larger fuel tank. It doesn’t impact me driving to work, to the shops, or wherever I choose to go. It is my choice that going to these places are worth the price of gas. It is a simple equation for me, the amount of pleasure from driving against the price of gas. Obviously I am able to afford the gas and I understand that there are more than a few families for who this is not an option. As the price increases I will reassess my choices for driving but for the foreseeable future I will continue to drive where and when I want to, the equation is still tilted heavily towards enjoyment rather than price.

A very cock-eyed, ie mine, view of the whole economic car situation is that as cheaper, smaller engined cars become more popular, less and less people will be purchasing the big engined cars. The auto companies, seeing this and desperate to move inventory will begin to reduce the prices greatly, thus bring such cars such as Lamborghini and Aston Martin down to the same price that the current Cadillac retail for, and therefore allowing me to buy some really cool cars at a good price! Since everyone will be driving hybrids, the price of gas will have dropped to encourage people to buy gas so I could also be able to fill up my sports cars for pennies. I love living in my head, it makes me happy!

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