Canada and the rising cost of
energy
Higher
oil prices have sharply raised the cost of filling up at the pump for drivers.
However, driving and commuting habits have been slow to change since 2002,
partly because the squeeze of higher gasoline bills on household budgets has
been partly offset by lower prices for other goods such as autos as well as by
higher incomes. Meanwhile, higher prices have lifted energy to Canada's leading
export so far in 2008.
The
combination of higher prices and increased gasoline consumption has raised the
portion of income consumers allocate to gasoline to 3.8% in the first quarter
of 2008, from 2.9% in 2002.
The
increase in spending on gasoline since 2002 was offset by the drop in the share
of income devoted to purchasing autos, from 6.2% to 5.3%. The drop for autos
entirely reflects lower prices, as Canadians increased vehicle purchases over
the last six years.
Meanwhile, the overall share of energy in consumer budgets has been steady
at 6.7% over the past three years, reflecting lower electricity rates. As well,
natural gas prices have risen only 32% by June 2008 compared with 2002, versus
a 123% hike in the cost of oil for home heating. A mild winter and cool summer
in 2008 has also provided some relief to overall household energy outlays.
Energy consumption as a share of disposable income had risen from 5.8%
in 2002 to 6.7% in 2005 before levelling off.
Despite the steady escalation of gasoline prices since 2002, Canadian drivers
have so far not cut back their consumption. Overall, the retail sales volume of
gasoline rose 7.2% from 2002 through 2007. Gasoline consumption rose in every
year, with the exception of a 0.4% dip in 2006 when hurricane damage disrupted
supplies and briefly sent prices to record levels.
The largest annual increase in gasoline
consumption was in 2007, despite the cumulative impact of years of rising
prices. Retail sales of gasoline rose 3.9% last year, largely reflecting a 1.9%
increase in kilometres driven by all vehicles as well as lower fuel efficiency.
A dip in monthly gasoline sales early in 2008 appears partly to reflect poor
driving conditions, due to several snow storms, and demand in the first five
months of the year remained 0.5% ahead of the same period last year. | 