Monday, October 27, 2008

5 Reasons to Hate Low Gas Prices

Han's parents arrived on Thursday from China for a 3-week visit, so this weekend I was driving a lot to show them around. People normally complain about high gas prices, but I love it when gas prices are high. Sure, I might pay more for food and to fill my car, but the benefits of high gas prices far exceed the inconvenience to me.

Here are my top 5 reasons why I don't like low gas prices:

5) As a commodity exporter, Canada's economy is more prosperous with high oil prices.
4) Along the same lines as point #1, the Canadian dollar is weakened by low oil prices
3) Low gas prices are usually a sign of a declining economy
2) The Big Oil companies have less to invest in alternative fuels.
1) People typically cut down on how much they drive when prices are high which helps to reduce the negative impact on the environment

You may be surprised to see #2 in my list, but as much as I despise the big oil companies, it's true that the more profitable they are, the more they will invest in researching alternative energy. Have you seen Chevron's "willyoujoinus.com" campaign. It reads "I will leave the car at home more", "I will carpool to work", "I will take my golf clubs out of the trunk". It also shows a counter that shows the number of barrels of oil consumed globally during your site visit.

I always question people's and corporation's intentions. Do I really believe that Chevron cares about the environment? Not if it will adversely affect their profit. I'm sure there are individuals within the company that care about the environment, but as a corporation shareholder growth is their number one concern. BUT, the very fact that they have this website shows that many of their customers do care about the environment (Or perhaps many of them care more about becoming dependent from "Middle East Oil"). In either case, the solution is still the same: consumers need to reduce their consumption, and corporations need to research other options.

If there wasn't a positive environmental movement out there, we wouldn't see the corporations emphasizing their concern for the environment. At the same time, having a website that shows that you care about the environment doesn't mean anything unless your actions follow suit. So on that note, I'll be keeping an eye on the oil companies to see if they put their money where their mouth (or website) is. In the meantime, low gas prices are a result of a drastically reduced demand for oil, so overall maybe it's not such a bad thing for the environment after all.



2 comments:

Chris R. Chapman said...

Disagree almost entirely:

High gas prices increased cost-of-living expenses out of band with the average family's abilities. When you're only getting 2-3% increases and inflation is running about the same, plus our exorbitantly high taxes all round, it added up to less disposable income all around.

While commodities do make up a good portion of our export-driven economy, we're benefited by a lower dollar as our largest trading partner is just south of the 49th parallel. In fact, in Ontario, almost 80% of our industry is directed south. The most significant impact is to our manufacturing sector - a high CDN $ makes our products less attractive when combined with high gas costs for transportation.

The oil companies are still making healthy profits in spite of lower consumer demand - BP, the most eco-nutsy of them all, recently posted a $10B profit. Life is good.

As for point #1, that's wishful thinking my friend. In fact, a recent survey found that overall, Canadians did not change their driving habits one iota even when oil was peaking at $150.

Jim said...

"High gas prices increased cost-of-living expenses out of band with the average family's abilities"

That's exactly what I'm saying: people are living beyond their means: Read: this post

"The most significant impact is to our manufacturing sector"

Manufacturing in North America is a dying industry anyway in this global age of information. In 2006 Manufacturing accounted for only 13% of Canada's labour force while services accounted for 76% (via the CIA World Factbook)

"The oil companies are still making healthy profits in spite of lower consumer demand"

The oil companies will continue to make healthy profits until the world embraces technology to leverage cleaner sustainable energy that's already available.

"In fact, a recent survey found that overall, Canadians did not change their driving habits one iota even when oil was peaking at $150."

In the long term, high fuel prices do have an impact on people's consumption choices. This cannot be denied. This so-called "survey" probably only takes into account people's short-term routines. Of course people aren't going to change their routine immediately when the price of oil goes up. But having less "disposable income" will surely make them think twice about driving 4 hours to their cottage and filling up their motor boat with gas.

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