Provincial Liberal leader Gerry Reid thinks there should be some type of gasoline tax freeze so that consumers can get some break from soaring gasoline prices. The news release on this is located here.
There are a couple of obvious problems with Reid's idea and his news release.
First of all, Reid claims the provincial government is making windfall profits from oil production on the order of $400 million this year due to high crude prices. As Reid puts it, "[m]edia reports this morning [29 June 05] indicate that the provincial government is making an extra $400 million in profits this year from increased offshore oil royalties."
That's dead wrong.
Those aren't profits, Gerry. They are the revenues from oil production due to the province under the agreements signed for production at Hibernia and Terra Nova.
Second, what he is proposing is far from clear. If what Reid notes is true, then 39 cents of every litre of gasoline is some type of government tax. But, he notes that the province collects 16.5 cents per litre in a fuel tax and a portion of the harmonized sales tax with the Government of Canada. In radio interviews, Reid suggested capping the tax take at a price to consumers of $1.00 per litre.
The provincial government can only change its own taxes by itself. Changes to the HST would require an agreement with the Government of Canada. As for the provincial tax he notes, it amounts to 16.5 cents on each litre. How would his proposal work?
Is he advocating a reduction of prices in the metropolitan St. John's region by a measly four cents per litre, something that could be done by dropping the provincial fuel tax? If that's what he is suggesting, then I will save the princely sum of a toonie the next time I fill up my 50 litre tank. In the meantime, the provincial government will still collect the better part of $8.25 from me, not to mention its slice of the HST.
I am overwhelmed at Gerry Reid's generosity.
Reid claims his idea is aimed at helping people who are having a hard time making ends meet. Well, for Reid's information, those people aren't using up huge amounts of gasoline filling their SUVs. Nope. Any break in prices will help people who can already afford to pay full price for their gasoline. Ordinary Shmoes like you and me will have to get by on the extra $2.00 Gerry wants to save on a fuel-up.
But the story got a little more interesting when Reid was doing interviews. His suggested $1.00 price cap actually produces a greater benefit for the people outside St. John's, in the mythical "rural" Newfoundland and Labrador where, coincidentally, the few remaining Liberals members of the House of Assembly are huddled dreading the next onslaught of the Williams election machine.
Reid's idea is really just a way of letting people outside St. John's continue to gas up with some modest break in prices. That's really the problem, the modesty of it, not any hidden idea he might look like he is standing up for his own constituents at the expense of others.
According to CBC, the highest gas price in the province is currently $1.17 per litre. Even if Reid managed to drop that by the full amount of the provincial fuel tax (i.e. $16.5 cents), people in the province would still be paying more than a loonie a litre. If that same approach were applied across the board and everybody's gas prices dropped by almost 17 cents a litre, St. John's drivers and those in other urban areas like Corner Brook would be still able to buy gasoline way cheaper than anyone else - 87 cents a litre. Guess where you are likely to find a honking great piles of gas wasting SUVs and trucks?
As for the provincial government, it would still be making out like a bandit with the HST and the oil revenues.
If Reid wants to take a run at the Liberal leader job full-time, he is going to have to come up with a better idea than monkeying around with gasoline prices in a way that likely wouldn't produce any real benefit at all to any consumer while government would still rake in the cash in buckets.
It seems like the Liberal opposition is reduced to foisting absurd ideas in place of solid ones.
That's based only on my quick look at Reid's notion. I haven't even gone to the lengths of at least one e-mail I received that reduced Reid's release to little more than vapour.
