Bank of Canada Governor Stephen Poloz says the fast-sliding price of gas is "like a Christmas gift" for Canadians. The average driver is already saving $30 a week compared to a few months ago. Investment bank Goldman Sachs figures the drop in gas prices is equivalent to an annual $125-billion (U.S.) tax cut for Americans – and counting.
The only people crying in their unleaded about declining crude prices are oil producers and environmentalists, two groups that are normally at odds. Oil companies (and the governments that depend on them) are seeing revenues go up in smoke. Environmentalists are living a nightmare scenario as drivers rev up on cheap gas.
We humans are a simple species, really. Gas prices down. Big-car sales up. The average fuel economy of new cars sold in the United States fell last month for the first time in four years as gas prices tested five-year lows and consumers raced to buy SUVs and pickup trucks.
Auto makers that reluctantly agreed a few years ago to increase the overall fuel efficiency of new cars by 40 per cent by 2025 now insist they can't meet those government-imposed goals. The 2025 targets are up for review in 2017 and Ford CEO Mark Fields last week called it "a great opportunity to talk about the feasibility and the time frame to meet those requirements."
Ottawa's current plan for reducing greenhouse gas emissions is based on auto makers improving the average fuel consumption of new cars from 8.6 litres of gasoline per 100 kilometres in 2010 to 5.1 litres in 2025. This gives auto makers two options: build cleaner engines or sell more small cars and electric vehicles.
Without dramatically higher gas prices, neither is likely. Technological and cost barriers mean there is less incentive for auto makers to invest heavily in big efficiency gains if consumers are unwilling to pay the sticker price. Higher gas prices might make drivers willing to fork out for more fuel-efficient cars. But the opposite is happening now as consumers opt for bigger vehicles.
Bigger cars, and more of them. Auto sales are set to hit a record 1.8 million vehicles in Canada in 2014. About 16.5 million cars and trucks will have rolled off U.S. lots by year's end, a million more than in 2013. Auto sales will top 18.3 million in China, up two million from 2013.
Lower gas prices could be the death knell for electric cars. As it is, only about 4,600 electric vehicles (EVs) have been sold in Canada this year, accounting for barely 0.27 per cent of all auto sales – in spite of provincial rebates of up to $8,500 in Ontario and $8,000 in Quebec. British Columbia has already given up and nixed its EV rebate.
In 2009, U.S. President Barack Obama set a goal of putting one million EVs on American roads by 2015. Despite a $7,500 (U.S.) rebate, he's about 700,000 cars short of meeting that modest target.
Except for a monied elite seeking a status symbol Tesla or climate-conscious Norwegians baited with even more costly government incentives, consumers have shown little interest in transitioning to zero-emissions EVs. Even if gas prices rise in coming years, abundant oil supplies suggest they won't rise high enough to drive enough consumers toward EVs or compact cars.
The cars on Canadian roads produced 85 megatonnes of carbon dioxide equivalent in 2012, compared to the 61 megatonnes generated by the oil sands. Prime Minister Stephen Harper says it would be "crazy" to kick the oil sector while it's down by imposing tough new emissions standards on the oil sands. But what's stopping him from raising gas taxes?
The federal excise tax on gasoline has stood unchanged at 10 cents a litre since 1995, while the levy on diesel fuel has remained at 4 cents since 1987. In real terms, federal taxes have declined significantly. Overall taxes currently range from 23.5 cents a litre in Calgary to about 48 cents in Vancouver and Montreal.
The International Monetary Fund says average gas taxes should be about 50 per cent higher in Canada to offset environmental and health costs. With gas prices averaging near $1 a litre in most of the country, down from more than $1.40 in August, now would be a good time for Ottawa to implement the IMF's advice.
Not that it's about to happen. That would be like Scrooge stealing the Christmas presents.