Simple Everyday Choices...how you can help the world’s poor…

Sounds crazy right? Who the heck would want to pay more for gasoline? I agree. I sure wouldn’t. But, by paying more, we will reduce consumption in our country and leave more opportunity for those in developing countries.

It works like this. Oil is a global commodity. It trades all over the world. Its price is based on fundamentals like supply and demand. That means that there is more consumption in the world than there is production, the price of oil will rise. If there is more production than consumption, the price will fall. At this point, almost all of the world’s consumptions is growing while production has stagnated. The supply curve is not the same to the one we saw in Economics 101. That is because at some point, no matter how high the price goes, there are physical limits to how much oil we can produce, at least in the short term. In the long term, we can develop new wells and new technologies, but this takes time.

Recently, the demand curve for oil and energy in general has been increasing. There are thousands upon thousands of people increasing their standard of living in developing countries like China, India and Brazil. This has caused a strain on the supply of oil and it is becoming increasingly difficult to keep up with this new demand. The purple lines show demand, as average wealth increases, the demand curve shifts to the right. Now there are more people able and willing to pay for fuel. This is happening because people in China, India, and Brazil are using more and more fuel as their standard of living increases. Thus the demand curve shifts.

This increased price has a tremendous strain on the poor of the world.

Canada consumed almost 40 billion litres of fuel last year. If we were to put a tax on fuel of, oh I don’t know, say 10 cents per litre, then this would drive demand down in Canada. Then, because it is more expensive, people will start to drive less. They will take public transport. The government can then increase the amount spent on public transport and improve services. So, its good for the environment, and good for the city that you live in. Its also good for countries like Malawi. Think about it. In Canada, the GDP per person is $38,700. In Malawi, it’s $800. Okay, you say, but things are cheaper in Malawi, and yes I agree but these are PPP numbers so it takes that into account. You can also argue that GDP numbers don’t reflect average income and that money is not distributed equally, but if we compare Gini coefficients, we see that Canada has a Gini of 32.1 and Malawi a Gini of 39. (Gini coefficient is a measure of income distribution, a Gini of 100 means that 1 person owns everything, a Gini of 0 means that there is perfect distribution of wealth). That means that the poor in Malawi are much worse off than the $800 per person would indicate, and that income distribution is even worse for the poor than it is in Canada. Now, think about cars, gasoline, oil etc. These are the same prices the world over. To operate a car in Malawi, costs exactly the same as it does in Canada. To transport goods in Malawi, the cost (with the exception of labour) is the same because parts, fuel, the vehicle, all cost the same. I’ll give you an example. My mini-bus fair is MK100 (about $0.75 CAN) each way. That’s MK200 a day. Now, you might think that a $1.50 is not that much, but consider that most Malawians earn less than $2 per day. As Malawi continues to grow, access to energy becomes absolutely necessary, so that people can take of the efficiencies and increases in production that energy brings. For example, my friend Mary is volunteering in Ghana, where their energy requirements are increasing by 10% per year. If Ghana is to keep growing, and if its citizens are going to lift themselves out of poverty, then access to energy is a must.

So, you can help, by increasing the price, by driving less, or when changing your car, getting a more fuel-efficient vehicle. When you conserve less fuel, the demand curve shifts to the left, and, assuming supply stays the same, the price will drop. This will make fuel cheaper for developing countries, and allow them to develop more quickly. It will allow the poor of the world to get access to fuel for lighting, for transportation so that they can get their goods to the market. We’ve already seen that gasoline consumption has dropped due to higher prices. Yes, its good for the environment, but its also good for the world’s poor. Higher prices might be a good thing.

Things like oil prices show how choices we make in our everyday lives affect the rest of the world. It shows that we are all connected in some way. No man or woman is an island. So, to make a difference and to help the poor, ask your MP to raise taxes on fuel. Buy a more fuel efficient vehicle. Drive less. We in Canada will feel some pain for it, but you know what they say, “no pain, no gain.”