Gas prices set to change when excise tax pause expires — what to know

As of September, Canada's fuel excise tax pause is set to expire, potentially increasing the cost of filling up vehicles. The federal government began this temporary measure in April, removing the federal excise tax from retail gas in Canada until September 7. Dan McTeague, president of Canadians for Affordable Energy, noted that the removal of the federal excise tax helped alleviate some of the sting from higher prices, but it hasn't managed to halt the surge in costs that has trickled into other sectors of the economy.

The current national average for regular grade gasoline in Canada is approximately CA$1.67 per litre, a rise from CA$1.64 a week ago and a significant increase from CA$1.33 at the same time last year. The fuel prices at the retail level are a result of several factors, including global supply and demand dynamics for crude oil, along with taxes and charges that businesses may pass onto consumers.

The federal excise tax is a separate charge from other taxes like HST, which is still in effect. Once the excise tax pause ends, it could result in an increase of about 10-11 cents per litre, depending on the region, on top of other price-altering influences. The transition to winter-grade gasoline, which is cheaper and more efficient for colder weather, will begin around September 15, one week after the excise tax returns.

This shift could potentially bring a slight decrease in gas prices, counteracting the possible price hike from the return of the excise tax. However, the global oil supply risks stemming from the Iran war could exacerbate the situation, leading to prolonged high oil prices if the constraints persist despite the rising demand. Consequently, the current government may decide to extend the excise tax suspension, depending on the trajectory of gas prices.