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September 2, 2005
Hidden Katrina tax, Fri., Sept. 2, 2005, 12:26 PM
Canadians are getting fed up with the high cost of fuel at the gas pumps. At C$1.34 a litre this morning in Toronto, which is the equivalent " apples to apples " of US$4.28 per U.S. gallon, the price has now doubled in a couple weeks. Canada, which supplies the U.S. with a significant percentage of its oil and gas needs, is failing its own people. And the television and news coverage is beginning to get quite hostile.
Here is a report from a leading Toronto news radio station:
No Relief At Gas Pumps Across Toronto
Sep, 02 2005 - 6:00 AM
TORONTO/640 TORONTO - The price of gasoline has gone up again.
It's as high as $1.34 a litre this morning; an increase of about 40% in the past week.
Prime Minister Martin claims his government is watching the price closely to make sure there's no collusion or price gouging.
As the price rises, the government takes in more and more money because of the GST we pay on gas. The gas tax itself, of course, is a fixed amount per litre and does not change.
The oil company websites have nothing to tell consumers about the increase. Not one of the major oil companies has posted a single notice, news release or statement to customers to try to explain the price hikes, but their share prices are going up."
So, while Americans are content in the fact that crude oil supplies destined for Canadians and Europeans are being diverted to the U.S., there is a growing discontent internationally. Higher costs lead to higher inflation, and economic slowdown, wherever it exists.
In terms of the capital markets effect, with the recent estimates of economic losses due to Katrina, now exceeding $100 billion, which is by far the largest financial crisis to date, I now believe that the typical post-hurricane bump to markets is a non-starter, in the near-term.
What lies ahead is an economic crisis, and a severe shock to capital markets.
I suspect that oil prices over $60 a barrel will be with us for many, many months. All the released oil from the emergency reserves will have to be replaced. That by itself will serve to keep prices high.
As the info from the Radio 640 station acknowledges, higher gas pump prices mean that government receives payment of higher taxes. So, in addition to higher fuel prices paid to the oil companies, the public is paying more to their governments.
That fact will soon be in hot debate by many governments.
Posted by Posted by Bill Cara on September 2, 2005 12:28:23 PM | Category: Cara Today in the Market