Thought of the Day - April 22 - Gas is Now Free

Hi All,

With gas at the pumps now in the mid 80s it turns out the product you are buying is pretty much free.

The BC taxes on a litre of gasoline total about 45 cents, the federal excise tax is 10 cents, finally you pay 5% GST on the total. So in short, given gas stations need to make at least 15 cents to make it worthwhile delivering and pumping - the gas itself is essentially free.

The driver of course is the sudden drop-off in demand. While some production capacity has now been curtailed, at the moment oil companies and governments are in standoff. If the economy does not significantly reopen soon, refineries that can’t substantially change their product mix away from gasoline will be forced to shut down. This has already started to happen in parts of Asia and Europe. Of course once this happens gasoline prices will again climb.

But before you run out and get a bunch of plastic carboys off Craigslist, remember gasoline ages. Unless stored in ideal conditions, it is probably only good for six to twelve months. However, as people with boats, motorcycles and small engines know, add some stabilizer and you are good for well over a year. Hey, if you are going to store some, while you are at it why not splurge. Shop around and buy gas without that nasty chemical inflicted on us by the US called Ethanol, pure gas lasts longer and your car will thank you for it.

Cheers

Cliff

P.S. Even more weird, oil futures went negative on Monday. Simplistically put, this means if you don’t take delivery of the oil you already bought, you not only don’t get your money back, in fact you have to pay the going rate for someone else to take it; for a short while the rate to give your oil away was $35 a barrel.