Soaring gas prices prompt renewed calls for government fuel tax relief

A day after U.S. President Donald Trump made a televised address to the nation about the war in Iran, the price of oil took another jump with the American benchmark West Texas Crude (WTI) nearing US$114 per barrel.

And with no end to the Middle East conflict in sight, the price of gasoline also continued its recent increase, selling at many Edmonton stations for about $1.74 per litre on Thursday — even higher in Calgary at $1.75 per litre.

Its a tough pill for many Albertans to swallow in such an oil-rich province.

“A buck 74 — crazy price,” said Paul Marsh as he filled up his vehicle in Calgary on Thursday. “I can’t afford to drive every day. I can’t wait to get back on my motorbike because it burns a lot less gas.”

“I do appreciate the supply chain is such that its affects everything from food prices, Amazon, everybody is going to be paying higher prices,” added Mike Shymka. “It’s regrettable for many people who rely on gas. It’s terrible.”

He agrees with recent suggestions that governments should consider providing some relief by cutting gas taxes.

“Economic policy is, during rough recessionary times, the government is to add more to help people and when things are good then, you know, take a little bit more tax,” said Shymka.

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Alberta government taking its time considering relief options amid oil volatility

Asked if and when the provincial government will be offering any relief to Albertans, Finance Minister Nate Horner, on his way into the legislature on Thursday, offered no promises.

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“There’s a lot of days left in the year. I did table a $9.4 billion deficit. And I will also remind people that even if that situation improves, we’ll update you through the quarters,” said Horner.

“We’re still bound by our spending rules within the fiscal framework.”

Alberta’s fuel tax is 13 cents per litre for regular gas, and four cents per litre for marked gasoline and marked diesel which is only available to authorized use is equipment like tractors and generators instead of personal vehicles.

Under Alberta’s gas tax relief program, quarterly reductions to the provincial fuel tax are introduced when WTI averages at least US$80 per barrel over a review period of 20 trading days.

Between $80 and $89.99 per barrel of oil, the province provides tax relief of between 4.5 cents and 9 cents per litre of gas.

When oil hits $90 per barrel the fuel tax is suspended. But when the price falls again to below $80 per barrel, there is no fuel tax relief.

Despite oil selling Thursday for well over $100 per barrel, the provincial finance minister indicated that Albertans will need to wait up to three months for the province to make a decision on whether it will cut fuel taxes.

“So there’s kind of 20 monitoring days, trading days, business days in the middle of the quarter. So for the next quarter it would be from May 18th to June 15th where it would be monitored and then July 1st would be the trigger,” said Horner.

“I think it makes a ton of sense that you have a longer monitoring period because once it does come off at any level it remains off for the next three months. So imagine a situation where July 1 our tax comes off completely — oil can plummet the next day (and) it will still remain off for next three months. So a little bit of delayed gratification there, but I think the rationale is strong.”

Despite Horner’s insistence that the province needs to wait before deciding on a gas tax cut, he supports the idea of the federal government suspending its fuel taxes until the end of the year, as suggested this week by federal Conservative Leader Pierre Poilievre.

Poilievre said Australia cut its excise tax by 26 cents per litre and Spain cut its sales tax by 30 cents per litre, saying he thinks Ottawa should do the same.

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Poilievre calls on Carney to suspend fuel excise tax, clean fuel standard

“Maybe that’s something the feds want to consider,” said Horner.  “The fuel taxes from the feds — I think it’s about 25 cents a liter, about 10 cents in excise, maybe seven in clean fuel and eight in GST. So I think they should look for something that’s long-term as opposed to these ad hoc reactionary changes that everyone’s looking for,” added Horner.

The head of Petroleum Analyis at GasBuddy, Patrick De Haan, expects the price of gas and diesel to continue to increase until the Strait of Hormuz is reopened — through which about 20 per cent of the world’s oil supply flowed before it was shut down during the Iran war.

Diesel, he said, could hit a record-high price within the next few days.

For the supply of oil to be cut off heading into the busy summer driving season is especially problematic, said De Haan, because it could contribute to an even bigger price increase.

And cuts to government gas taxes, he claims, could make it even worse.

“While there have been conversations about gas tax holidays and waivers and temporary temporarily reducing prices, those types of measures, though terrific for the wallet, would likely further imbalance and cause prices to go up, by increasing demand and removing disincentives from Canadians driving,” said De Haan.

“Anything that can push demand up, whether it’s seasonal increases or reduction in taxes are likely problematic that could increase prices even more.”

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Premier Danielle Smith says scrapping the fuel tax wouldn’t fully help with high gas prices

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