We can’t afford to drop heating costs

I voted Green for the first time in 2004, and the reason was because Jack Layton was running on a platform of keeping fuel costs low, and I knew even then that this was a disastrous direction.  He’s at it again. Repeatedly over the last couple of weeks, I’ve seen messages from Jack saying the government should drop the tax on home heating fuels this winter.

In 2004 it was gasoline.  Now it’s home heating fuel.  It doesn’t matter.  Jack is wrong, as history has repeatedly demonstrated.

During the run-up to the recession of late 2008, the United States was struggling with rising gasoline prices in the midst of a presidential election.  Candidates Hilary Clinton and John McCain advocated a gas tax holiday.  It was a very popular policy and Barack Obama was struggling in the polls while steadfastly refusing to support such a plan.  But Obama was right, and Hilary Clinton, John McCain and Jack Layton are wrong, as many economists pointed out.

Obama had himself supported a state tax holiday as a state senator a few years earlier.  But as he noted, the move did little to change prices, increased oil company profits and caused people in Illinois to postpone or drop plans to make the changes required to use less oil.  In the long run, all it did was increase oil dependency, and prepare the state for an even worse crisis.

Around the same time as this 2008 primary, motorists in Germany were interviewed about the impact of world oil prices, and one after another said that the change was not significant.  The change was not significant in Germany because gas taxes in Germany are so high that the cost of the oil itself can triple and still be a fraction of the overall price.  Motorists have adapted to high overall fuel prices by buying more efficient and compact cars, by building around steadily improving public transit system hubs, and by adopting compact urban forms.  So even when the global price of oil rises, they don’t feel the sting.  It’s a fraction of their per litre cost, and they don’t use many litres.  Americans have adapted to cheap fuel prices by building far-flung suburbs attached to employment hubs by interstate highways.  Even harder hit than the average American at this time were the airlines, which are exempt from all fuel taxes by international conventions, and as a result are extremely exposed to fuel price fluctuations.

It’s the same situation with home heating.  We’re addicted to cheap fuel and it will be painful to stop.  Mr. Layton is right that we should stop subsidizing the oil companies and fund a cross-Canada retrofit programme, as the Greens have been recommending.  But in order to make retrofits more attractive, in order to encourage the sort of deep retrofits which will be absolutely necessary anyway as we leave the fossil fuel era, we also need to keep the price signals associated with higher fuel taxes.

During the 2008 presidential primary, Barack Obama said of the gas tax holiday proposed by his opponents that it wouldn’t really help get Americans through the crisis, it was designed just to help McCain and Clinton “get through the election”.  So maybe Jack Layton is expecting an election.  But he’s still fighting for the wrong thing.