The real price of oil

Incensed about high price of gas? For a quick reality check, take a trip to the corner store and have a look at what liquids you can you buy for a dollar a litre. Milk? Nope. Bottled water? Not likely. Roofing tar? No way. For all the shrill indignation about rising fuel prices, the simple fact is that gas remains by far the most outrageously under-priced commodity in the world.

Consider the long journey that a litre of gas makes from far-away oil fields to your local filling station. Add to that the expensive and destructive military adventures needed to secure foreign oil supplies, and the human and political strife that inevitably follows. Let’s not forget climate change and the mounting externalized costs from increasingly weird and violent weather around the world. Why then should gas cost about half as much as bottled water?

One reason is “perverse” government subsidies that promote things we are actually trying to discourage, such as fossil fuel consumption. Ottawa shovels $5.9 billion of your tax dollars annually to the fossil fuel industry. This is much more than current government support for sustainable energy technologies that will no doubt become the cornerstone of our future economy.

In the absence of either political will or personal restraint, we should be grateful that expensive gas might save us from ourselves. For instance, cheap gas and the continuing oil orgy would only encourage governments to throw more money at the oil sector. This would imperil the future of the Canadian economy by hitching our wagon to the dying horse.

Likewise, there is little doubt that drivers would continue to endanger the future health of our planet by choosing vehicles that that actually get far worse mileage than the Model T did, for the simple reason that gasoline happens to be cheaper than water.

Artificially low gas prices have long stifled conservation efforts and alternative technologies, while fueling a boom in vehicles so grotesquely inefficient that I suspect our children will someday marvel at them in a museum.

SUVs are a fine example of the irrational behavior in the waning days of cheap oil. The only reason such gas-guzzlers are even legal is that technically they are considered “farm implements” under a well-exploited industry loophole. Rather than investing in innovative technologies that would produce more efficient cars, automakers have shrewdly invested in highly successful lobbying efforts in order to ensure that they don’t have to.

The recent accord between the federal government and car makers is a good case in point. After literally years of gentle coddling from the federal government, the automakers agreed to voluntary efficiency requirements that will actually allow emissions to rise by 18% between 1990 and 2010.

The last time Ottawa signed such a non-binding agreement in 1982, it failed completely to improve the average fuel efficiency of Canadian vehicles because there was no legal requirement to do so. It is noteworthy that governments possess a unique power called “regulation” that makes such protracted and fruitless negotiations unnecessary.

Not to fear, the market of Adam Smith will succeed where all else has failed. Higher fuel costs will foster much needed interest, innovation and investment in conservation and alternative technologies.

In fact they already have. After years of flat sales, hybrid vehicles are now taking off. There is now a waiting list several months long to buy a Toyota Prius anywhere in Canada. In Germany and the UK that have much more expensive gas, that wait is more like ten to twelve months. Ballooning gas prices have even caused some used hybrid cars to increase in value from the original selling price.

Oil companies may turn their massive resources to developing these clean energy alternatives rather than choosing to go down with their ship. A study by Shell International found that renewable sources could supply 50% of the worlds energy needs by 2050.

Rather than posing for photo-ops with the car industry, the federal government should seize the opportunity to make some long overdue policy changes. These include shifting gasoline tax revenue to fund public transit, increasing green infrastructure investment in cities, and expanding investment in renewable energy – the fastest growing energy sector in the world.

A side benefit from this vast global shift away from oil is the small matter of the fate of the planet. Aside from a few well-known pseudo-scientists shilling on behalf of big oil, virtually the entire scientific community is united in the knowledge that climate is real, it is happening right now and that it is very, very dangerous.

Still enraged about expense gas? Rather than griping about how much it costs to top up your SUV, consider instead the simple fact that you might well have been an idiot to buy such a vehicle in the first place.

Mitchell Anderson is a freelance writer who lives in Vancouver. (Published in the Toronto Star in April 2005)