My last post elicited some interesting comments, and I thought it useful to bring up one more comment from Tasha Kheiridden, to the effect that taxes don't work. She pointed to the example of cigarettes, where shame and health concerns played a bigger role, in her view, than taxes alone. But cigarettes are addictive, with only two choices: give up, or keep smoking. There is no middle ground.
Gas prices in the Montreal area are about $1.35 today; and (as almost always) $0.10 cheaper in Ottawa in spite of the new $0.04 carbon tax. But historically, I can recall gas prices at the pumps as high as $1.55 per litre at the beginning of the decade when oil prices ran in the $80 to $100 per barrel range. Sales of full-sized pickup trucks and SUVs plummeted as people switched to more efficient vehicles. the reverse happened in 2014, when the Saudis opened the oil taps in an effort to put the US shale oil people out of business, which is why the Ford F150 outsells the Honda Civic 2 to 1 in Canada today.
In Finland, which is a large sparsely populated country like Canada and where distances are large, gas prices are consistently well above $2.00 per litre. Yet the economy is doing fine and people drive long distances to their cottages. The thing is, there are essentially no full-sized pickup trucks in Finland. Finns select their cars partly with gas prices in mind. The choice is not between quitting or carrying on as before; there are options the consumer can select.
So in the case of gas prices, it seems to me that the consumer will respond to a price signal, however it comes about, as demonstrated by the choices made by Canadian and Finnish consumers when they buy a new car.
Keep the comments coming!
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