Rebate, a favoured word for most Canadians, may not be used in the same sentence as gasoline in future government announcements, as the Tories and economists don't see the two fitting together in a sensible, fiscal way.

Image | nl-gas-pump-20070423

Caption: Some would argue that such an outpouring of government money is not needed because Canada's economy is not in trouble. ((CBC))

Load Image

Frustrated and upset are familiar words used by Canadians these days when talking about gas prices, which hover just above $1.30 a litre in most places in Canada, compared to 89.8 cents in June of 2004. And the news is not good for the future, it seems.

In late May, the National Energy Board said that gasoline prices, "which are strongly influenced by crude oil prices, will also remain high and continue to reflect changes in the price of crude oil" in the coming months.

The reasons, according to the board, include "seasonal demand increases, geopolitical risks to supply, low spare producing capacity, and the weakness of the U.S. dollar, which is resulting in more investment money flowing into commodities, including oil."

Those explanations have been tossed around for the last year or more by experts, but coming from a federal agency it drove the point home that here in Canada, things will stay the same or get worse.

So, what can be done to help motorists?

In the U.S., President George W. Bush said in April that economic stimulus cheques would be mailed to more than 130 million people who filed tax returns. While not a rebate, the payout — which could amount to $1,600 for a family of four and will total $107 billion US, was in response to a sagging economy hurt by rising gas prices.

Some would argue that such an outpouring of government money is not needed because Canada's economy is not in trouble, and that the Americans, because of the housing credit crunch and inflation issues, are nearing a recession.

Even if Canada decided to give half, or a quarter, of what the American government gave out, based on our population, it would still provide federal Finance Minister Jim Flaherty and his department with many sleepless nights trying to figure out where the money would come from.

Motorists pulling up to the pumps would be happy with some extra money to fill up, and could direct some cash elsewhere in their budgets. The big economic arguments against a rebate might not have much meaning to drivers when moving money to a college fund instead of a gas tank.

The common argument is that a gasoline rebate would drive up demand, if people put more gas in their tanks with the extra money, thus driving up the price of gas. As well, the thought of the government giving people rebates with tax money raised from them could seem ironic. Gasoline tax cuts could also stimulate the sale of gas and cause the expected repurcussion.

It seems there's no easy answer to higher gas prices from the standpoint of governments.

It's a common-denominator problem, one that nobody can avoid, whether you are filling up your tractor-trailer full of goods or your family van for that trip to the cottage. A rebate would be an easy and tempting way to gain favour with the electorate but it would likely come with a fairly steep pricetag, and maybe with cuts in other departments.

People are truly hurting, no question, but how to pay for a rebate and how much to give and who to give it to are questions with no easy answers.

Certainly the Conservatives are indicating they are in no hurry to move on the issue.

"The ability of governments to affect the price of gasoline per se is so small that it's not worth doing," Prime Minister Stephen Harper said late in May in Ontario when questioned after an announcement on new food labelling regulations.

"What you've really got to do is lower costs for consumers generally, rather than try to fight the upward trend in the price of gasoline."

The prime minister trumpeted his two-percentage-point cut to the GST as a way to help Canadians save money.

Niels Veldhuis, director of fiscal studies at The Fraser Institute, doesn't back the idea of a gasoline rebate program and sees such rebates, like many economists do, as a short-term political fix. He doesn't see the GST cut as a big deal and would rather see the government take aim at personal income tax reductions, for example.

"If you reduce income tax, people will have more money and they can choose where to spend it," Veldhuis said from Vancouver. "They can spend it on public transit. They can spend it on gas."

Veldhuis doesn't have much use for a cut to gas taxes either, again saying income tax cuts are the way to go in the long term.

Rebate programs have been used fairly extensively in Canada, at the provincial level and at the federal level, so they are not new concepts.

In January 2006, for example, Alberta sent out tax-free $400 resource rebate cheques to every resident and has also provided natural gas rebates whenever the commodity price rose above a trigger point.

Some provinces, in partnership with the feds, also offer rebates for purchases of energy-efficient furnaces and appliances or to upgrade insulation or to buy a programmable thermostat, for example.

Saskatchewan spent $130 million to cap increases on Crown-owned SaskEnergy natural gas bills at 10 per cent in 2006.

Ottawa sent out rebates in January 2006 via the Energy Cost Benefit program, which provided rebates of $125 to $250 to lower-income Canadians to help them with higher energy costs.

New Brunswick established a $10 million household rebate program in 2006 to help families cope with the rising costs of energy.

This year's federal budget killed a federal program that offered a $2,000 rebate to consumers who bought fuel-efficient vehicles. The program, which was announced in the 2007 budget, will come to an end March 31, 2009, with vehicles built after 2008 ineligible for a rebate.

So rebates have been used by governments, but the question remains, would a gasoline rebate work?

Bryan Karney, a civil engineering professor at the University of Toronto who chairs the division of environmental engineering and energy systems, said increased gas prices don't affect people equally and "there is a social justice aspect to having a well-thought-out rebate."

But rebates cost a lot of money to administer, Karney said, adding there is a "certain amount of value of people being exposed to a more realistic or higher price of energy.

"Our consumption of gasoline is staggeringly large. We have seen, historically, lower prices than other jurisdictions which have learned to cope with higher prices quite well.

"They've learned to be better at conservation and drive smaller cars and use public transit more."