Nothing takes the edge off the dog days of winter better than low gas prices.
There is simply a positive feeling heading to the gas pumps and topping off the tank with gasoline which is being sold at the lowest prices we as consumers have seen in years.
Sure we recognize the low prices will not last, but we relish the small break in terms of our budgets anyway.
Of course as in most things, there are two sides to every story, and as much as we like low gas prices, there is a dark cloud around that silver lining.
With the decline of oil prices a reduction in oil exploration has taken place.
In fact the whole sector is tightening its belt as profits disappear.
It might be argued that at regular prices, prices which are always in lockstep from gas company to gas company, mean more than reasonable profits, but at today’s pump prices those profits have to be gone. It has to be remembered here a sizeable chunk of pump prices are taxes to start with.
While the oil companies will not be suddenly facing financial disaster, unless these prices were very long term, and that is unlikely, smaller companies in the exploration field and its related businesses are feeling the pinch.
Don Rae with Crusader Drilling in the city spoke of the situation in a Yorkton This Week story last issue (Jan. 14).
And when reports hit media last week the Weyburn Red Wings of the Saskatchewan Junior Hockey League were facing a $200,000 debt by season’s end, a deficit which could threaten the long-time franchise, the downturn in the oil patch was cited as a contributing factor.
It is also a sure bet oil prices, and what they will do over the next several months, has Premier Brad Wall and his Saskatchewan Party government burning the midnight oil trying to ascertain the effect on the upcoming budget. While that midnight oil might be cheap right now, the overall impact is going to be a reduction in not just oil royalties, but exploration permits, and taxes as oil sector workers face layoffs and reduced buying power.
Even in Alberta there are hints the impact on provincial coffers might be severe enough to have that province instituting a provincial sales tax, which would be a dramatic move on their part given that province’s history.
How Wall’s government deals with the impact will be interesting to see, since budget wiggle room is limited. Health, education and debt servicing take the lion’s share of the budget, and none of those seem to have a lot of fat to trim. Last year the government did tighten money in health, and we heard Sunrise Health Chair Lawrence Chomos voice concerns then about how that might impact local services.
So while consumers are enjoying a little relief in terms of gas costs, the broader impact may mean government budgets with restraints which will not be very popular in the face of reduced revenues.
