In 2008, the ministry produced a study on the impact of a rise in the price of hydrocarbons on demand, but it was only recently updated.
Government economists have observed over more than 20 years that a 10% increase in the price at the pump leads to a 1.2% drop in consumption on average. This year, it even increased with the strong recovery of the economy, despite the explosion in prices.
In short, except to curse the pump, motorists react little to a price increase because demand is very inelastic. In microeconomics, price elasticity is a way of calculating our sensitivity to a price change.
Over the past year, according to the Régie de l’énergie du Québec, the price of regular gasoline has gone from $1.30 per liter to $2 per liter on average. This is an increase of 54%, but, theoretically, consumption has decreased during this time by only 6.5%.
Beyond the uncertainty regarding global oil supply and limited refining capacity, demand is so inelastic that it allows the industry to keep prices high. If it were more elastic, prices would fall
explains Pierre-Olivier Pineau, professor and holder of the Energy Sector Management Chair at HEC Montréal.
It’s a short-term elasticity and, in the short term, it’s very difficult for people to adjust, he adds. They have chosen housing and vehicles, and they cannot radically change their means of mobility immediately.
« We often have the impression that this is a bad time to pass and that the respite will come later. This is what we almost always see in the gas price cycle. »
The surge in prices is not reflected in the use of public transport, according to the Société de transport de Montréal. The increase must be of long duration for the effects to be felt in the modal shift
underlines the organization.
A lack of data
We tried to find out the volumes of fuel consumed in Quebec in the past year to get a more concrete idea of the impact of price variations. Impossible mission.
Pierre-Olivier Pineau regrets that these figures are not disclosed by governments and gasoline sellers in Canada
. However, these data would be very useful to the public when Quebec’s energy policy provides for a 40% reduction in petroleum products consumed by 2030.
An effect marginal
on public finance
Normally, the increase in the price of gasoline should be synonymous with an increase in revenue for the State.
However, recently in an interview, the Minister of Finance, Eric Girard, told us that the effect is ultimately marginal
on Quebec’s finances.
The QST applied to the price at the pump increases government revenues, but the growth in fuel and heating expenses for the government must be taken into account. We should add that revenue from the specific Quebec tax on gasoline, fixed at 19.2¢ per litre, is decreasing at the same rate as demand.
