Today, mostly due to rebellion in Iraq, the price per barrel of West Texas crude went over $106 and Brent went over $112. What's that mean for Ontario?
Obviously it isn't good. Ontario pretty much imports all its oil and gasoline (there's a bit of production in Southwest Ontario, but that's not material). Gasoline prices per litre have been high already lately anyways and this doesn't help. Ontario is a car based culture, except for downtown Toronto, so any increases in gas prices are going to come from an already burdened consumer. That money has to come from somewhere and it is going to come from disposable income.
Ontario's manufacturing industry has already been decimated and isn't bringing in the export income it used too. Every extra dollar spent on gasoline contributes to Ontario's trade deficit and that's going to hurt GDP in the second quarter. I've already been predicting that due to the US first quarter's GDP contraction, Ontario's is going to be poor and possibly negative. The US second quarter GDP has been predicted to bounce back strongly and should help Ontario's second quarter GDP, however high gasoline prices will have an impact. We'll see.
One aspect of higher gasoline prices is that HST is now charged, so the Ontario government gets 8% of retail gas prices, which raises with increased prices unlike the excise tax. Gasoline consumption is somewhat inelastic so higher prices shouldn't change consumption that much in the short term so there should be more HST revenues. I really need to look up total gasoline consumption in Ontario to see just how much HST revenue there is.
Gasoline consumption is somewhat inelastic, however high gas prices long term is going to drive down miles driven. I've seen statistics for miles driven overall in the US per year, I'd love to see it for Ontario.
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