Negative Effects of Increasing Gasoline Prices

Topics: Gasoline, Fuel tax, Economics Pages: 10 (3301 words) Published: March 25, 2011
An economic system is a structure composed with people and institutions. Both dimensions are responsible for maximizing the wealth of an economy, regardless of being on a domestic or international scale. These people and institutions play a large role, whether at the top or bottom of the societal ladder. At the top of the ladder, people and institutions are responsible for managing money and taxes received from people and institutions at the bottom of the ladder. This money and taxes can come from a wide assortment of sectors including agriculture, healthcare, workforce, and transportation. The transportation sector involves the taxation of gasoline. Gasoline balances on a positive and negative line. On one hand, it provides transportation for the majority of citizens and companies in North America. However, Menkes and Fawcett explain, “octane enhancing constituents of gasoline pose a number of health hazards including metallic (lead, manganese), aromatic (e.g., benzene), and oxygenated additives in both industrialized and developing countries”(1997,270). When approaching the matter of weather or not to double taxes, the easy answer is yes. The government doubles taxes and gasoline users are discouraged to fuel their pollutant producing vehicles. However, the repercussions of this tax extend far and beyond such an appearance of an easy remedy. There are a number of factors to consider when looking at this situation more closely. Doubling gas taxes will affect the stable base of rural communities. With an increase of gasoline prices, production prices will increase. The cost of goods increases as a result of transportation cost increasing. The effects will slowly increase up the ladder through consumer and in turn the greater economic sector internally as well as externally. This essay will demonstrate why doubling taxes on gasoline produce a negative chain reaction both in the Canadian domestic economy as well as the Canadian international economy.

The current domestic economy in Canada is greatly affected by oil and gas. When there are large reserves and an increase of active oil drills, the economy seems to receive a boost. This is because prices for such things like gas and oil fall and people are able to consume more gas at a lower price. There is more supply as prices fall, therefore people save money on gas and can consume other items in the economy. People working in these industries have more job openings and more jobs filled, creating a lower unemployment rate and a higher national per capita income (Associated Press, 2006). Since, people use oil and gas for so many different things like heating their homes, driving their cars, and a variety of other sources, the overall Gross National Product (GNP) for the consumer will rise (Associated Press, 2006). Economic growth is affected through significant fluctuations in inflation of oil and gas. With the rise in gasoline prices, negative effects can be seen beginning with the agricultural sector and moving all the way up to large corporate institutions.

For the entire population, doubling the taxes on gas means that at the least, food costs will increase. Farmers are dependent on fuel for their equipment with which they grow food. Farm machinery decreases the need on farms for farm workers. Rather than spending money to pay salaries for multiple employees, the modern farmer uses his financial resources to purchase and maintain farm equipment. Farm machinery and agricultural equipment requires diesel fuel to operate, which contributes to air pollution. Svejkovsky exemplifies this by stating, “expenditures on Canadian farms increased by an average of 26 percent in 2005, and fuel costs contributed heavily to that increase”(2007). Specifically, Canadian farmers spent about six billion dollars on diesel fuel and two billion dollars on gasoline in 2005(Svejkovsky, 2005). The outcome of this is that the additional cost will be passed along to the...

References: Barron,John. Blanchard, Kelly and Umbeck,John.2004. “The Journal of Economic Education”. An Economic Analysis of a Change in an Excise Tax, vol. 35,no. 2 (Spring 2004) 184-196. Journal on-line. Available from
Menkes, David and Fawcett, Paul.“Environmental Health Perspectives” Too Easily Lead? Health Effects of Gasoline Additives, Vol. 105 no.3 (March 1997).270 of 270-273.Journal on-line. Available from
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