Everyone is complaining bitterly about high fuel prices but they are here to stay and in the greater scheme of things expensive gas can be a positive thing when viewed from a long economic perspective if managed properly. There is even an environmental up side to higher gas prices.
The amount of economic pain during the transition from cheap gas to a high-cost transportation reality depends on urban leaders. If Winnipeg's mayor, Sam Katz, who was elected for his business savvy, decides to make Winnipeg run efficiently in a high-priced energy world it can be done.
To make Winnipeg function efficiently in this new economy some strategic changes need to happen in the urban planning department. The low gas prices that made long commutes from the suburbs possible are a thing of the past. It's time to rethink urban transportation priorities if Katz is going to manage this city for growth and prosperity.
Strategic urban planning should be about setting goals that meet Winnipeg's needs 50 years from now and not about getting elected for another term.
Once prices hit the economic pain threshold the demand will come into line with supply creating price stability. The CIBC's energy analysts predict that we can expect to see $83 US a barrel for crude oil by 2006 and $100 US a barrel by 2007. Somewhere in there, or at higher prices, consumers will no longer be able to afford to drive to work every day. If the city planners do not take this into account, Winnipeg will suffer as businesses look to other cites where there are effective public transit systems.
So far, gas prices have not slowed demand. Consumers will continue fill up as they always did, until they hit the economic threshold where the cost of gas is cutting into their food or rent money.
Currently, more than half of the fuel sold in North America is used for transportation. Any reduction in this area will have a positive effect on environment and make reaching Kyoto goals possible without reducing industrial production.
Smog and greenhouse emissions will decrease in lock step with reduction in car usage. As car usage drops, the cost of keeping the city's streets car friendly will fall and downtown parking lots will become available for housing.
If Canadian consumers think for a moment they've hit high prices at $1.30 a litre, they need to look to Europe where the August price in Amsterdam was $7.13 a litre.
North Americans, including Canadians, are gas gluttons. According to the U.S. government's Energy Information Administration the per capita consumption of automotive fuel for 2001 in Europe was 286 litres. At the same time, in the U.S. it stood at 1,624 litres. Canadians use at least as fuel much as Americans. The Europeans have had the advantage of time to adjust to high fuel cost. The challenge for Katz is to enable rapid adjustment in Winnipeg.
The notion that Europeans can live without cars easier because they live in smaller countries is a myth. Canada is large but more than 80 per cent of us live in cities.
While Europeans have made the adjustment, we let our cities sprawl until we became car dependent. Surveys show that three out of every four trips in European cities are either by foot, bicycle or public transit. When the y do drive their cars they drive smaller, more efficient vehicles. European cities are also more densely populated with more room for people making public transport more efficient.
If Winnipeg's city council and mayor instructed the urban planners to get serious about revitalizing Winnipeg's core, and combining that with an efficient public transit component, they will be giving Winnipeg a head start on a future where high energy prices will dominate all decisions.
The Europeans have discovered that after consumers hit the initial economic pain threshold, a 10-per-cent increase in fuel prices drops fuel consumption by seven per cent. Let's study the existing models and then apply their best to Winnipeg.
Reducing fuel prices by cutting the provincial gas tax and fixing potholes instead of building a better transit system may win an election, but they only mask the inevitable. Applying the increased gas tax revenue to a public transit system and rebuilding the city core is the kind of strategic thinking that will put Winnipeg in front of other western cities.
It's time for Katz to prove he's got the vision and business chutzpah to successfully take Winnipeg into a high-priced energy economy.