Canada’s gas tax pause ends Sept. 7. Prices could rise, but cheaper winter fuel may ease the hit soon after.
Gas prices in Canada could take another jump next month.
A temporary federal fuel tax break is set to end on Sept. 7. So, drivers could pay more at the pump just as global oil markets remain under pressure.
However, there may be some relief soon after.
Federal fuel tax break set to end
In April, the federal government paused the excise tax on gasoline sold at retail stations. The pause was set to last until Sept. 7.
So far, Ottawa has not confirmed whether it will extend the break.
Dan McTeague, president of Canadians for Affordable Energy, says the tax pause has helped soften the blow from high fuel prices.
Still, the break has not stopped prices from rising.
The federal excise tax is separate from other taxes, including HST. If the tax returns, McTeague estimates it could add about 10 to 11 cents per litre, depending on the region.
Global oil prices remain a key risk
Meanwhile, the war involving Iran has put more pressure on global oil supplies.
The Strait of Hormuz is a major shipping route for oil. It normally carries about one-fifth of the world’s crude oil and other supplies.
Yet, fears of attacks have sharply reduced traffic through the area. Damage to energy and shipping sites has also added to supply worries.
As a result, oil prices remain well above last year’s levels.
West Texas Intermediate crude was near US$82 a barrel at the time of publication. That was down slightly from a recent high near US$83. However, it was still above the roughly US$75 price seen one week earlier.
Canadian gas prices are already higher
Drivers are already feeling the pressure.
The Canadian Automobile Association says regular gasoline is averaging about $1.67 per litre across Canada. That is up from about $1.64 a week earlier.
It is also far above the roughly $1.33 average recorded at the same time last year.
Gas prices can change for many reasons. Global oil supply and demand play a major role. Taxes, fuel costs and other charges can also affect the final price at the pump.
Winter fuel could bring some relief
There is, however, a possible bright spot for drivers.
Gasoline changes with the seasons. In summer, fuel makers use a blend designed to help cut pollution during warmer weather.
That summer blend tends to cost more.
Then, as colder weather arrives, fuel makers switch to winter-grade gasoline. This blend helps engines start in freezing temperatures. It also uses more low-cost butane.
As a result, prices often fall.
McTeague says the seasonal change could lower prices by about eight or nine cents per litre, depending on the region.
The switch starts after Sept. 15.
That timing could matter.
If the federal excise tax returns on Sept. 7, drivers could first see a sharp rise. Then, only about one week later, winter-grade fuel could help push prices back down.
Drivers could face a short price shock
In other words, the pump price may take a quick ride higher before easing.
The first week of September could bring an increase if Ottawa lets the tax pause expire.
After Sept. 15, however, cheaper winter fuel could offset part of that rise.
Still, global oil markets could change the picture.
Oil supply remains the big question
The International Energy Agency expects global oil demand to fall over the next few months.
Higher oil prices could push households and businesses to use less fuel. Yet, the agency also warns that global supply risks remain high.
Demand could rise again next year, too.
Therefore, a longer oil supply crunch could send gasoline prices much higher.
McTeague warns that low global oil inventories could keep pressure on prices for months or even years.
For Canadian drivers, then, the Sept. 7 tax deadline is only one part of the story.
The bigger question is what happens to global oil supplies.
If the federal government extends the tax pause, drivers could get more short-term relief. If it does not, Canadians may see higher prices first, followed by some seasonal relief later in September.
