The obsession too many people have with the price of gas on any given day is lunacy.
For those cheering the low prices currently being seen locally (from 77 to 81 cents per litre), the fuel fumes have clouded their minds. They may be winning at the pump but they're losing everywhere else.
For a driver who needs 100 litres of gas to get the tank topped off, the savings from it costing 80 cents instead of a buck per litre is $20. Sounds great, except for the fact that $20 and arguably a lot more has already been taken out of their wallet.
Let's start with food prices, especially fruit and vegetables, which have soared in recent months, partly due to the sinking Canadian dollar but also because of a drought in California.
"The percentage of our budget that goes to transportation is much smaller than the percentage of our budget that is consumed in food," Ian Lee, an economics professor at Carleton University's Sprott School of Business, told the Canadian Press. "Yes, we're saving at the pump, but the savings are more than offset by what we're paying in the food stores."
For lower-income earners and those living in poverty, gas prices aren't that big of a deal because they either don't own an automobile or restrict their driving to the basic to-and-from work. Rising food prices, however, particularly if they have children at home, can be the difference between paying the bills for heat and light or not.
For those with more money than month, they still lose with low gas prices.
The value of their RRSPs and mutual funds are taking a beating, since stocks in energy companies likely form a significant part of their portfolio. Those stocks have fallen in time to the drop in oil prices. For those who plan to keep working for another decade or more, oil stocks can now be had for bargain prices, but for those within sight of the finishing line of their working career, this kind of hit can add months or even years to the long-awaited date of finally telling the boss to take this job and shove it.
But don't feel too bad for the oil companies. They're still looking after themselves (and you, if you're invested in them directly or through your retirement savings).
"When you hear about lower oil prices, it does not necessarily translate into lower gasoline prices," Perry Sadorsky, associate professor of economics at the Schulich School of Business at York University, told CP. "The integrated oil companies have a tendency to keep the price at the pump higher in order to compensate for some of the lost profits they're incurring on the production side."
And then there's government.
After nearly 10 years of the Stephen Harper Conservatives in power, the federal government is almost as dependent on taxes collected from energy producers as their Alberta counterparts. It's going to take Justin Trudeau's Liberals more than 100 days in office to turn that around. In the meantime, they made billions of dollars worth of campaign promises, including some major infrastructure spending, but the oil and gas revenues needed to pay for them are in the tank.
Today's taxpayers will pay for it now in budget deficits and their kids will pay for it down the road in debt servicing charges.
Suddenly saving $20 or $30 for each visit to the gas bar doesn't look so rosy.
Extremes in the market, both at the high or low end of the spectrum (hello, Vancouver real estate values), cause problems to the economy that are felt by consumers. Unreasonably low gas prices are battering the bottom line, too, just in a different way that unreasonably high gas prices do.
Several market analysts have pointed out that the optimum price for a barrel of oil on the world market is about $60 (U.S. dollars, of course, not that worthless plastic garbage in our wallets) and Canadians should be paying about a dollar or so for each litre of regular gas.
At those levels, oil patch jobs are sustainable, the stock values and profits of oil companies benefit Canadians setting aside money for retirement through their fund managers, the loonie can actually call itself a dollar without embarrassment, governments can count on a steady source of revenue and essential imported products, especially food, is affordable.
For those all smiles as they fuel up at these prices, the reality is what they're paying is no laughing matter.
