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

Gas prices in Canada are expected to rise once the temporary pause on the federal excise tax on gasoline expires next month. The tax, which was removed in April, has provided some relief from rising fuel costs. However, the expiration of the pause could result in an increase of 10-11 cents per litre, depending on the region. This would be separate from other factors that influence gas prices, such as global supply and demand dynamics and seasonal changes.

Currently, the national average for regular gasoline in Canada is about CA$1.67 per litre, up from CA$1.64 a week ago and roughly CA$1.33 compared to the same time last year. The transition to winter-grade gasoline, which is cheaper and better suited for colder temperatures, typically begins around September 15, one week after the excise tax is scheduled to return.

However, this transition may also result in a temporary price decrease of roughly eight or nine cents per litre. The Iran war has severely constrained global oil supplies, and the International Energy Agency (IEA) expects global demand for oil to drop in the coming months as higher prices discourage consumption. However, demand is expected to increase again next year.

If the Iran war leads to prolonged oil supply constraints while demand grows, oil and gas prices could continue to rise over the long term.