Navigating the Radio-Canada website? We and a limited number of our advertising partners use cookies to collect some of your data and use it to improve your experience and present you with personalized content and advertisements. If you are not comfortable with the use of this information, please review the privacy settings of your device and browser before continuing your visit.
Federal Fuel Tax Suspension: A Relief for Canadian Drivers
In response to soaring fuel prices driven by geopolitical tensions in the Middle East, Prime Minister Mark Carney announced the suspension of the federal excise tax on gasoline and diesel, effective April 20th and lasting until Labour Day, September 7th. This temporary measure is projected to reduce the cost at the pump by 10 cents per litre for regular gasoline and 4 cents per litre for diesel.
During a press conference, Prime Minister Carney described the move as a responsible and temporary tax relief aimed at assisting Canadian households. He also highlighted its potential to lower costs for truckers and businesses facing increased transportation expenses. This decision comes as a direct response to the escalating prices at the pump, exacerbated by the ongoing conflict in the Middle East and disruptions to global oil supply chains.
A Measured Response Compared to Conservative Proposals
The Liberal government’s action falls short of the proposals put forth by the Conservative Party, led by Pierre Poilievre. The Conservatives advocated for a full suspension of taxes on gasoline and diesel for the remainder of the year, along with the permanent removal of other levies on energy production. While the government acknowledges the financial strain on Canadians, it has opted for a more targeted and time-limited approach.
Understanding the Federal Excise Tax
The federal excise tax is a fixed-rate tax imposed by Ottawa since 1995 on gasoline and since 1987 on diesel. Home heating oil, natural gas, and propane are exempt from this tax. Provinces also levy taxes on fuels, as do cities like Vancouver, Victoria, and Montreal. In Quebec, a provincial carbon tax is also integrated into the price displayed at the pump.
These fixed taxes at the pump are further compounded by the Goods and Services Tax/Harmonized Sales Tax (GST/HST) and Quebec Sales Tax (TVQ) applied to the total sale. In Quebec, one of the provinces with the highest gasoline prices, combined taxes represented over 32% of the price paid at the pump in April 2024.
Global Factors Driving Up Fuel Costs
The current national average price for a litre of gasoline is just over $1.76, a significant increase from the $1.26 seen before the recent escalation of tensions involving the United States and Israel and disruptions to oil flow through the Strait of Hormuz. Normally, approximately 20% of the world’s crude oil transits through this vital waterway from the Persian Gulf states, including Iran.
Since February 28th, passage through the Strait of Hormuz has been severely restricted due to attacks and Iranian mines. When negotiations between the United States and Iran to end the conflict and reopen the strait failed, the U.S. announced a naval blockade of Iranian ports and an attempt to restore shipping lanes. This announcement led to a slight price decrease, but the crisis persists, and volumes remain well below pre-conflict levels. Experts predict that even if the Strait of Hormuz reopens soon, it will take months for the global oil supply chain to stabilize.
Sources: CBC News, La Presse canadienne
