Rising fuel prices have sparked renewed calls for the government to cut fuel taxes
A day after US President Donald Trump made a televised speech to the nation about the Iran war, the price of oil jumped again with US West Texas Crude (WTI) approaching US$114 per barrel.
And with no end in sight to the Middle East conflict, the price of gasoline also continued its recent rise, selling at most Edmonton stations for around $1.74 per liter on Thursday – even higher in Calgary at $1.75 a litre.
It’s a tough pill for many Albertans to swallow in the oil-rich province.
Another jump in fuel prices is prompting calls for the federal and state governments to give drivers relief by reducing gas taxes.
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“74 bucks — that’s a crazy amount,” Paul Marsh said as he filled up his car in Calgary on Thursday. “I can’t drive every day, I can’t wait to ride my motorcycle again because it burns too much gas.”
“I really appreciate that the supply chain affects everything from food prices, to Amazon, everyone will be paying higher prices,” added Mike Shymka. “It is sad for many people who depend on electricity.
He agrees with recent suggestions that governments should consider providing some relief by reducing gas taxes.
“Economic policy says that, in difficult economic times, the government should add more to help people and if things are good, you know, take more tax,” said Shymka.
Asked if and when the provincial government would provide for Albertans, Finance Minister Nate Horner, on his way to the Legislature on Thursday, made no promises.
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“There’s a lot of days left in the year. I’ve put a $9.4 billion deficit on the table. And I’m going to remind people that even if that situation improves, we’re going to report it quarterly,” Horner said.
“We are still bound by our spending rules within the financial framework.”
Asked about the province’s gas tax cuts, while on his way to the Alberta Legislature on Thursday, Finance Minister Nate Horner said as early as July 1.
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Alberta’s fuel tax is 13 cents a liter for regular gas, and 4 cents a liter for marked gasoline and marked diesel that is only available for authorized use in equipment such as tractors and generators instead of personal vehicles.
Under Alberta’s gas tax relief program, quarterly provincial fuel tax cuts are introduced when WTI reaches at least US$80 per barrel in a 20-day trading review period.
Between $80 and $89.99 per barrel of oil, the province offers a tax rebate of between 4.5 cents and 9 cents per liter of gas.
When oil reaches $90 per barrel the fuel tax is suspended. But if the price falls below $80 per barrel, there is no fuel tax relief.
Although oil was sold on Thursday for more than $100 per barrel, the minister of finance in the province indicated that Albertans will have to wait three months for the province to decide whether to reduce the fuel tax.
So there’s kind of 20 days of monitoring, trading days, business days during the quarter. So the next quarter will be from May 18 to June 15 where it will be hired and then July 1 will be the trigger,” Horner said.
“I think it makes sense that you have a long time to watch it because if it goes out at any level it’s closed for the next three months. So imagine a situation where on July 1 our tax goes out completely – oil can be depleted the next day (and) it’s still going to be inactive for the next three months. So it’s a little bit of delayed comfort there, but I think the reason is strong.”
Although Horner insists that the province must wait before making a decision on the gas tax reduction, he supports the idea that the federal government should suspend the fuel tax until the end of the year, as suggested this week by the Leader of the human rights organization Pierre Poilievre.
Poilievre said Australia cut the excise tax by 26 cents a liter and Spain cut the sales tax by 30 cents a litre, and said he thought Ottawa should do the same.
“Maybe that’s something the feds want to look into,” Horner said. “The fuel taxes from the feds – I think it’s about 25 cents a liter, about 10 cents in excise, maybe seven cents in clean fuel and eight in GST. So I think they should be looking at something long-term as opposed to these short-term changes that everyone wants,” added Horner.
GasBuddy’s head of petroleum analysis, Patrick De Haan, says the government’s gas tax cuts could increase prices even more because it will increase demand for fuel by removing barriers for Canadians to drive.
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Head of Petroleum Analyst at GasBuddy, Patrick De Haan, expects gas and diesel prices to continue to rise until the Strait of Hormuz – through which about 20 percent of the world’s oil flowed before it was closed during the Iran war – is reopened.
Diesel said it could fetch a much higher price in the next few days.
Oil cuts during the busy summer driving season are particularly problematic, De Haan said, because they can contribute to even greater price increases.
And the state’s gas tax cuts, he says, could make it worse.
“While there has been talk of gas tax holidays and repeal and temporary price reductions, those types of measures, while bad for the wallet, are likely to create imbalances and cause prices to rise, by increasing demand and disincentivizing Canadians to drive,” said De Haan.
“Anything that increases demand, whether it’s a seasonal increase or a reduction in taxes is likely to be a problem that could increase prices even more.”
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