Statistics Canada is reporting that in May, pump prices rose by 48% as compared to the same period last year thanks to supply constraints and high crude oil prices. This surge was further exacerbated by the growing demand for fuel due to the easing of travel restrictions instituted during the pandemic. Gas prices are further expected to rise by another 5% in June, according to the Bank of Montreal’s chief economist, Douglas Porter.
However, despite this glum situation, the government has ruled out instituting a gas tax holiday for now. This makes Canada the only G7 country not taking such steps to alleviate the gas prices. Japan, France, Germany, Italy, and the UK have opted to subsidise, lower taxes, or provide a consumer rebate to lower fuel prices. In the US, President Joe Biden has proposed to Congress to pause federal gas taxes for three months.
Natural Resources Minister, Jonathan Wilkinson, has said that the federal government has no plans as yet to cut gas prices through such actions as halting the federal gas tax. Instead, the government is opting to try and stabilise the rising prices by boosting supply, an action he says is already happening.
Wilkinson added that Canadian families were continuing to receive support from the government in the form of measures that were already announced in the 2021 budget by Finance Minister Chrystia Freeland. This includes an increase to benefit cheques, Old Age Security, the Canada Workers Benefit, and a reduction in child care costs.
Conservatives had earlier called on the government to provide a gas tax holiday through options such as halting the 10 cents per litre federal excise tax, suspending the carbon price, or lifting the GST on gasoline.
However, some experts, like Commodity Context’s Rory Johnston, agree that it is an acute shortage in gas supply that is the main reason behind price increases, and that artificially reducing the pump prices would be the wrong move. Vancouver School of Economics Professor Kevin Milligan echoes this sentiment, saying that market producers currently held the balance of power and that reducing taxes would only serve to increase their profits rather than reduce consumer prices.
While the government holds out, some provinces have undertaken their own measures to cut gas prices, with Alberta’s Premier, Jason Kenney, cutting the 13% provincial excise tax on gasoline in April and confirming that the measure would remain for as long as the global benchmark price for oil was over $90 a barrel. Alberta currently has the lowest gasoline price on average in the country.
University of Calgary’s economist, Trevor Tombe, notes that though this tax cut has aided gas prices, it was expensive and that there were better ways to help Canadians that were financially struggling, including providing temporary boosts to income support programs.
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