We recently posted on how Ethanol was a win-win for political parties and their corporatist friends and how Governments supported its use despite being less environmentally friendly than undiluted gasoline and more harmful to human health.
Other than the financial backscratching here is another reason why Governments are so enamoured of Ethanol and similar ‘climate mitigation’ schemes.
The price of gas at the pump in Ontario is made up of the sum of the costs of production delivered to the gas station plus the profits made by all in the chain of distribution.
In 2013 (and based on the cost of crude oil at the time) this equalled approximately 88.2¢/L on average in Canada. Included in the price is the couple of pennies a litre profit made by the gas station and the anemic 6.2% net profit made by the oil companies.
Added to the price of the gasoline is the Federal Excise Tax on gasoline, currently 10%, the Provincial Gasoline Tax currently 14.7% and the HST currently 13% added to that will soon be a carbon tax, as yet undefined, as promised by Premier Wynne. If Ontario follows BC’s lead the tax will probably be somewhere around 7¢/Litre (however Ontario’s carbon tax will not be revenue-neutral and as such is unlikely to succeed in the way BC’s has).
Here in Ontario we are fortunate, so far, compared to Vancouver where not only do they have an added carbon tax, but the city of Vancouver levies an 11% tax on every litre of gasoline sold…
2014 is the latest year for which reliable government data is available. For the purposes of this analysis we’ll use the annual 2014 average price of gasoline in Southern Ontario which was $1.268/L (in Norther Ontario it was $1.332/L).
Based on that average price the Federal Excise Tax was 12.68¢/L, the Provincial Gas Tax was 18.6396¢/L, the HST was 14.5876¢/L
In addition to the Ontario subsidies, Ethanol production receives a 6¢/L Federal production subsidy. Ethanol has 32% less energy than gasoline. That means gasoline mixed with 10% Ethanol (Federally mandated 5% + Provincially mandated 5%) has 3.2% less energy than pure gasoline. Given that the amount of energy in a fuel determines the work that can be extracted from it, i.e. the distance driven, this means that one can drive less far on a litre of gasoline diluted with 10% Ethanol.
In 2014 Ontario gross gasoline sales were 16.1781 billion litres which we can assume for the purposes of this approximation, were all 10% Ethanol. Had pure gasoline been available to Ontarians the same number of kilometres could have been driven using roughly 15.66 billion litres of gasoline.
Those 16.1781 billion litres of gasoline required 1.61871 billion litres of Ethanol which at the 2014 average price of 67.8623¢/L resulted in additional revenues of $1.09849 billion in sales and a Federal subsidy of $97.1226 million. There are no rational reasons for using Ethanol in gasoline, so in the absence of government mandates the industry would never have received these additional revenues.
That extra 518 million litres cost Ontario drivers, at 2014’s average price, at least an extra $656.824 million.
That extra 518 million litres resulted in the following revenues to the Federal and Ontario governments:
|Federal Excise Tax:||$65.6824 million|
|Ontario Provncial Gas Tax:||$96.5531 million|
|Federal portion of HST:||$29.0630 million|
|Provincial portion of HST:||$46.5008 million|
That amounts to a total tax revenue for 2014 alone of $237.7993 million – not a bad return for not producing anything… and we understand better why the Ethanol policy is a win-win-win for the Provincial Government, Liberal Party and Ethanol producers.