June 8, 2008
What's next for drivers?
VANCOUVER — Barbara Turpin loves driving. Expensive gasoline is changing everything about Ms. Turpin's driving.
She drives more slowly. She drives less. She puts $20 worth in the tank instead of filling it up. She walks to the nearby Tim Hortons. She and her partner, Ray Davis, make fewer visits to friends scattered around British Columbia's Lower Mainland. And they're looking to buy an electric car to replace a 1990 Volvo.
“I've been a little heavy-footed in the past when driving. You know, it's funny, even speeding tickets hadn't slowed me down too much. But fuel efficiency, it's the thing that's caused me to slow down. And I'm conscious how quickly I accelerate. Every drop counts,” said Ms. Turpin, who lives in Chilliwack, an hour east of Vancouver.
The story is suddenly the same across the country after Canadians grumbled but largely didn't react dramatically to the relentless rise of the price of gasoline this decade. Five years ago this week, it was 70 cents a litre, but even as it rose to $1 and higher, Canadians were undeterred, driving more and more.
Now, however, everything has changed, and the effect is everywhere, from the 2,600 jobs lost in Oshawa east of Toronto as General Motors Corp. announced the closing of a pickup-truck plant this week, to the millions of Canadians driving less, taking transit and riding bikes, and buying hybrid cars.
“This is really the first time that we've heard a lot of people saying, ‘I've got to change the way I drive, the way I get to work, the car I buy,'” said Cathy Hay, an analyst at MJ Ervin & Associates, a Calgary gasoline consultancy that publishes a widely followed weekly survey.
A record average price of $1.33 a litre for regular gas was recorded late last month, dropping slightly to $1.31 this week – and Ms. Hay said Canadians shouldn't be shocked to see prices around $1.45 this summer. There appears little doubt that gas prices are going higher – and possibly much higher. Prices are set to jump six cents for the weekend, said Liberal MP Dan McTeague, well known for his ability to accurately predict the rise and fall of prices at the pump in Montreal, Ottawa and Toronto using a series of calculations.
Friday, oil rocketed to its biggest single-day increase, jumping $10.75 a barrel to a record of $138.54, more than double a year ago.
In a society built on cheap oil, the price for all products is set to surge. Hitting everyone – individuals, businesses and all levels of government – expensive oil will reshape how people live, how they get to work, the size of their homes and how their cities are built.
This is a breaking point. At the start of January, gas was $1.07 a litre and oil was $99 a barrel. Statistics Canada numbers show gasoline sales up 3 per cent in January and February compared with last year. In March, with gas shooting toward $1.20 in cities such as Montreal and Vancouver and oil climbing to $110, Canadians cut back, buying no more fuel than a year ago.
Some of the most dramatic evidence of Canadians changing their habits is statistics from TransLink, the transit authority in the Vancouver region.
Total ridership had climbed steadily and markedly – 30 per cent in 2007 compared with 2002 – as oil surged higher, echoed throughout Canada, with the Canadian Urban Transit Association reporting a 3.5-per-cent increase in ridership.
But, tellingly, ridership on the West Coast Express, a regional train service whose terminus is downtown Vancouver, experienced an “incredible surge” in April, shooting up 26 per cent compared with a year ago as British Columbians took 43,337 more trips, avoiding expensive commutes by car.
“It has to be gasoline,” said Ken Hardie, a TransLink spokesman. “It's people converting.”
Across Canada, the story's the same.
In Saskatoon, Yolanda Van Petten bought a silver-and-blue smart car this year after her 1982 Volkswagen Rabbit went on the fritz. “I laugh at the gas pumps. I fill up, it's 20 bucks,” Ms. Van Petten said.
In St. Francois Xavier, 15 minutes west of Winnipeg, Kim Wozniak and her husband used to make one-day trips to their cottage on Lake Winnipeg, a little less than two hours away. The brief jaunts are over. “Last year, maybe; this year, no,” Ms. Wozniak said.
In downtown Toronto, mechanics at Urbane Cyclist have never been busier, and the wait is three weeks for a simple tune-up. A couple of blocks away, a city council committee Friday recommended a 17.5-per-cent increase in taxi fares, similar to the 12-per-cent hike Calgary city council approved in late May.
Roger Richard, president of Associated Cabs in Calgary, plans to put 15 more hybrid cars on the road this summer after he added 10 to his fleet two years ago. Within five years, he'd like to convert the majority of his cars to hybrids. In fact, he envisions an industry-sized shift toward the fuel-efficient cars.
“If one looks at the fuel savings and low maintenance, it does make good economic sense to go in that direction,” Mr. Richard said.
And in B.C., Central Okanagan's School District No. 23 put North America's first sustaining hybrid electric school bus into operation in February. The bus cuts emissions by 90 per cent compared with a solely diesel-run vehicle, and transportation supervisor David Misener estimates the school district saves 20 to 25 per cent on each tank.
But will it all just turn around, as it did after the energy crisis of the 1970s, in which motorists lined up at gas stations and inflation spiralled into the double digits? If gasoline falls back as fast as it has shot up, will Canadians go back to their SUV-loving ways?
It appears unlikely, oil industry executives and analysts say. The cheap oil of the 1980s and 1990s is all used up, or resides in closed countries such as Saudi Arabia. There's lots of oil in the ground elsewhere, but in extreme frontiers, whether it's 10 kilometres below the seabed in the Gulf of Mexico or in the oil sands of Northern Alberta.
Expensive energy, for Canadians, is the new normal, said a Harris/Decima poll last month, suggesting any respite in price won't halt current changes. Canadians figure the price of oil is going nowhere but up, with the average guess of the price of a barrel five years from now sitting at $200, with only one in 10 believing the price will fall.
One in four say expensive gas has already led them to cut back. More people – almost one in three – are about to do the same, the poll showed.
“What people are saying is whatever pain they feel now, they expect that the pain won't abate,” said Bruce Anderson, president of Harris/Decima.
The ramifications of expensive oil are extreme, given that North American society, with its sprawling suburbs, big homes and long commutes, is built on cheap crude and electricity.
Structural change will top agendas at governments of all levels, economists say. Although changes such as driving less can occur quickly, the biggest shifts will take years, meaning a long and probably painful transition for the average family.
“There's going to be a lot more discussion about the long-run impacts,” said Douglas Porter, deputy chief economist at BMO Nesbitt Burns. “Everyone was lulled in to a false sense of security in the eighties and nineties. The way our cities are built, the way our industry is structured, is based on inexpensive oil. You can't turn that around on a dime. Whether you're talking large single-family homes or urban sprawl in Toronto and Calgary, you can't undo that over night. We're talking decades, not weeks and months.”
And, coincidentally, Mr. Porter noted that expensive fuel – be it gasoline or electricity – is effectively the carbon tax most Canadian politicians outside of B.C. won't propose for fear of losing precious votes. The increase in the market price, he added, is also far greater than any tax envisioned in provincial capitals or Ottawa.
Trends of change extend throughout North America. In the United States, the country that brought the world the automobile and the interstate highway, Americans drove 4.3 per cent less in March than a year earlier. It was the first time since 1979 – the last height of the energy crisis – that driving fell in March and the biggest drop since numbers were first kept in the 1940s.
Expensive oil also shakes the Canadian economy. While provincial treasuries in oil-producing jurisdictions such as Newfoundland and Alberta will see windfalls – Alberta stands to rake in an additional $6.8-billion this fiscal year if oil averages $130 a barrel – the price has reached a point where pain is more prevalent than benefits for most Canadians. Economies such as Ontario's that depend on auto manufacturing are severely vulnerable.
There's no going back, auto executives say, with Alan Mulally, CEO of Ford Motor Co., telling investors and analysts last month that the world has hit a “tipping point.” Sales of sports utility vehicles are collapsing, Ford's perennially popular F-series trucks saw sales drop 21 per cent last month compared with two months earlier, and the Toyota Prius has gone from a curiosity to one of the continent's most popular cars.
And GM is considering selling its iconic Hummer brand, the hulking dinosaur of the massive-vehicle era.
Fuel costs have pushed airlines, especially in the U.S., to slash routes, lay off thousands of workers and ground fleets of older, inefficient planes. Air Canada and WestJet Airlines Ltd. have fared better, and summer travel probably won't be affected, given that most families book holidays well in advance.
Still, the hit is coming, although industry analysts say there will likely be a delay before passenger loads drop noticeably. The full effects of recent fuel surcharges levied by Air Canada and WestJet will likely be seen in the fall, when travel demand weakens, said Isabelle Dostaler, a business professor at Concordia University in Montreal.
While most people focus on the $1.30-plus figures displayed at gas stations from Victoria to St. John's, another wallop on the wallet is coming for Canadians as Environment Canada predicts a hot summer from coast to coast. The prices of natural gas and coal, the fuel for making electricity for many homes, have soared alongside crude oil, ensuring that bills for those who crank up the air conditioning will be more expensive.
Mike Brigham isn't waiting to see what happens. Head of the Toronto Renewable Energy Co-op, he just put the finishing touches on a $52,000 photovoltaic solar-electricity system at his 2,700-square-foot home in Toronto's Beaches neighbourhood.
It is all part of necessary change for the planet, spurred by expensive energy.
“People can spend that much, easily, on a new kitchen,” Mr. Brigham said. “It's an investment.”
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