Canadians driven by harsh reality

Wall Street rallied powerfully Monday based in part on a 34 cent drop in the price of a barrel of oil — to $45.69. It says something about the market today when investors celebrate a minuscule retreat from gasoline prices almost 70 percent higher than those of a year ago. Overall, energy prices are up 36 year over year.

Today, the Department of Labor will release July figures for the Consumer Price Index. Expect energy prices to be a driving factor, perhaps curbing inflation by slowing economic growth.

While economists try to figure out how the United States’ economy can continue to absorb high energy costs, an all-too-brief trip to Vancouver Island suggests one implication: Sport utility vehicle sales will continue to suffer, and the profits of Detroit’s automobile makers with them.

You just do not see them on the roads around Victoria, especially the larger models. Their absence is so obvious you start to look for them. And look. And look.

And while looking, you pass the Petro-Canada gas station advertising gasoline at 93.9 cents per liter. That’s $3.55 per gallon, folks. If you have to do the conversion, you can’t afford it.

Average Canadians have decided they cannot, so the vehicle mix on the roads looks much different than it does down here. There are many more smaller cars, a familiar assortment of trucks, and lots of vans. If you are camping, the number of well-preserved Volkswagen Vanagons is enough to bring on a bad case of déjÀ vu.

According to a June 10 report from Toronto-based Scotia Economics, sales of large SUVs in Canada fell 28 percent in May compared with the same month in 2003. Sales of all light trucks, the category encompassing most SUVs, were down more than 12 percent.

By comparison, sales of large SUVs in the U.S. managed to increase by about two percent, and the total for all light trucks was up about 8.3 percent.

The headline of the Scotia Economics article, by the way, was “SUV sales hit by high gasoline prices in Canada, but remain in fast lane in the United States.”

That may not be the whole story. The Spokesman-Review ran a May 7 Associated Press report on a slump in SUV sales in April, with growing inventories of unsold vehicles. Sometimes, it’s hard to figure, eh?

Now, high prices for gasoline, high prices for anything, are not news in Canada. But the difference at the pump seems counter-intuitive because Canada is an energy exporter. In 2003, according to Statistics Canada, the value of Canadian crude oil exports was $20.6 billion. Imports were $13 million. The tar sands in northern Alberta contain Saudi Arabia-sized petroleum reserves, and technology keeps pushing down the cost of extracting that energy.

Contrast that with the U.S., which imports over half the oil consumed. Energy imports for June alone exceeded $15 billion.

Yet, more than three percent of a Canadian household’s disposable income gets poured into the gas tank, while the share in the U.S. is less than 2.5 percent.

“These differences may spur Canadians to change their vehicle buying patterns more quickly than U.S. consumers,” Scotia concludes.

Even three percent does not seem like much. Maybe that’s why American consumers pout, but continue to pull up to the pump with a vengeance. Will American roads start to look like those in Canada anytime soon, with only scattered SUV owners to survey the packs of compacts around them at the traffic light?

Probably about as soon as we buy our gas by the liter. In the meantime, those Canadian highways sure feel roomy.