Thursday, October 1, 2015

They Can't Have It Both Ways

Celebrate: Gas got cheaper.
El Tiempo continues its campaign for cheap gasoline today with its report that 'Colombia is one of the nations where people 'sweat' more to buy gasoline.'

The numbers compare the price of gasoline to the average income, but forget to mention that that
average wage earner probably does not own a car, and so does not directly buy gasoline, but does suffer the impacts of cheaper fuel in the form of pollution, massive traffic jams and worse services in schools when gasoline is not taxed or even subsidized, as it is in Colombia.
What cheap gas gets you.

El Tiempo gives good coverage to problems like traffic congestion, global warming and, even, sometimes, air pollution. So, how does it choose to ignore the fact that the cheap gasoline it so desires contributes to all of those problems? Perhaps because the wealthy people who run El Tiempo all drive around in private cars and because the paper's owner, Luis Carlos Sarmiento, Colombia's richest man, who owns banking, cargo and construction companies, profits, at least in the short term, from cheap fuel.

In fact, Colombia has quite cheap gasoline compared to other nations in the region. Neighbors Ecuador and Venezuela, whose gas is cheaper, are driving themselves broke by subsidizing fuel.

Those who run El Tiempo should think of their city's and nation's real interests instead of just their own.

Colombian gasoline is quite cheap for the region.
By Mike Ceaser, of Bogotá Bike Tours


coolcoil said...

Your claim that gasoline is not taxed is flat out incorrect. In fact 26 to 30% of the price of gallon of regular (corriente) gasoline goes to the government.

There are two taxes:

One is a flat fee of COP $1096.49 per gallon that goes to the National Government. That money is part of the general fund.

The second is the tax that goes to the local department, called the sobretasa. In most of the country the sobretasa per gallon is COP $1269.69. The purpose of the sobretasa is to pay for transportation projects, both road construction/repair and public transportation infrastructure.

Bogota is a special case where the sobretasa is 25% of the basic cost of gasoline, which works out to a per gallon tax about 20% higher than the rest of the country. The sobretasa paid for the capital costs of Transmilenio. However, as I am sure that you will be pleased to hear, starting in 2014 the money that used to support Transmilenio has instead been put aside to fund the proposed subway.

The "subsidies" for gasoline are small to non-existent and are an order of magnitude smaller than the taxes. The subsidies are a misguided attempt by the government to keep the price of gasoline stable from month to month. The government sets the wholesale price of gasoline based on the market commodity price. If the government underestimates the market price for the coming month, they make up the difference to the wholesalers. If they overestimate, the government gets the difference back. Unfortunately, for political reasons, it's always tempting to the government to underestimate and keep prices down. Frankly, it's a small amount that moves the price less than COP $100.

Diesel is a different story. Though the taxes collected on that also outweigh it's subsidies it is much closer to being a wash. Taxes on diesel are lower and the wholesale subsidies much higher. There is some logic in this imbalance, though the efficacy of it, in my mind anyway, is highly questionable. I will note that a recent IMF report on the subject, which does call for higher taxes on fuel in Colombia, noted that the poorer Colombians would be impacted more heavily by increased diesel taxes since most of their transportation options are fueled by diesel.

Here are a couple of links that explain the taxes. They don't cover everything I've discussed here, and if anyone has a serious interest in further discussion, I will provide further documentation:

I also take issue with your claim that lower wage Colombians are not gasoline users. You are only considering automobile owners. A great number of low-wage Colombians drive motorcycles and spend a not insignificant portion of their income on gasoline.

As for the pollution argument, something to keep in mind is that modern gasoline-powered cars pollute much less than diesel per gallon of fuel burned. I don't have the data to show what the per-passenger-mile pollution is for a private car vs. a diesel bus with 40 passengers or a motorcycle with no pollution controls. I would suspect though, that the car is much better than the motorcycle and not that different from the bus.

Miguel said...

Hi Coolcoil - Thanks for your comments, although I disagree.

I don't believe I said that gasoline is not taxed. It is, but it is also subsidized.

Look at this article, about how the government assumed a charge of 3.2 billion pesos for the deficit in the fuel 'stabilization' fund, which, as you said, mostly stabilizes the price downward as a populist move. And the subsidies continue, but are now integrated into the general budget.

Here's a more pointed commentary: , which also integrates the fact that Colombia could have sold its fuel for more by exporting it. That's 543 pesos per gallon for gasoline, 746 per gallon for diesel. The situation has since changed, of course, because of the collapse in int'l oil prices.

You are right that almost all Colombians consume fuel, even if they don't own cars. But the subsidies go disporportionately to the wealthy, who do have cars.

Gasoline vehicles do generally pollute less than diesel ones do. But, as you can often smell around gasoline-powered cars, they also belch out lots of fumes. Few, I believe, have working catalytic converters.

Whatever the taxes, I don't believe cars come anywhere close to paying for their impacts on public space, pollution, noise, congestion, etc.

And look at all the trouble and expense from used tires. Their impacts, assumed by society in general, is yet another subsidy to cars and trucks. And that's only one example.



coolcoil said...

You said it was not taxed at the end of second sentence:

"...when gasoline is not taxed or even subsidized, as it is in Colombia."

Miguel said...

My intention was that only the 'or even subsidized' phrase apply to Colombia, but I agree it's confusing.