Doug Ford said gas would get more expensive because of the carbon tax -- but it’s still cheaper now than it was a year ago

Thestar.com
July 18, 2019
Josh Rubin

Ontario Premier Doug Ford has been steadfast in his warnings that once the federal carbon tax kicked in, motorists should be prepared to pay more at the pumps.

It is now more than three months since carbon pricing came into effect in Ontario -- but prices are lower today than they were one year ago.

In fact, the sharp drop in gas prices has been widely cited as one of the key reasons that Canada’s national inflation rate has slowed, according to new figures from Statistics Canada.

So what’s going on?

According to a fuel price analyst with pump-watching firm GasBuddy.com, the average price of gas at Ontario pumps did indeed rise when the new carbon pricing came into effect. Prices rose from 114.3 cents per litre on March 31 to 117.9 cents on April 1, the first day of the new tax.

And since then, prices have continued to rise to 125.3 cents. However, that subsequent increase has nothing to do with the tax, according to Patrick DeHaan.

“New taxes generally have a one-day impact on change, so the increase since April 1 is more fundamental stuff. Supply and demand, really. So it looks like the impact of the carbon tax is three cents and a bit per litre,” said DeHaan, head of petroleum analysis at GasBuddy.

However, despite the recent rise, gas prices in Ontario are still lower than they were one year ago.

On July 17, 2018, the average price at Ontario pumps was 130.1, DeHaan said. Since then, prices have dropped across the country.

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In fact on Wednesday, Statistics Canada cited a 9.2 per cent drop in gasoline prices across the country over the last year as the main reason inflation fell to 2.0 per cent in June.

The price of gasoline fell by more than 17 per cent in Alberta over the past year, partly due to the fact that the new administration of Premier Jason Kenney eliminated a provincial carbon tax there in May.

DeHaan suggested one of the biggest factors in the national decline in the price of gasoline has nothing to do with carbon pricing. Instead, he thinks it’s likely due to the U.S. trade war with China. That trade war has slowed the growth of the Chinese economy, and caused a global slump in demand for oil.

The effect of the oil price slump has shown up at the pumps. Barring a sudden resolution, the relatively low prices won’t go away, DeHaan said. In fact, he expects the price of gasoline to drop back down to $1.20 a litre by the end of the summer.

“Unless there’s some kind of crazy curveball, prices usually fall later in the summer because people just drive less. Again, that’s just supply and demand,” said DeHaan.

If there’s a resolution to the trade war, or if there are threats of more tensions in the Persian Gulf, oil prices -- and gasoline prices -- could well rise.

“If Iran starts attacking shipping, that could push it up,” said DeHaan.

Still, with the ever-present possibility of a tweetstorm from U.S. President Donald Trump moving global markets, DeHaan admits it’s a bit of a mug’s game trying to make solid predictions.

“There’s a lot more uncertainty than usual,” DeHaan said.

A year ago, oil prices were hovering around $72 (U.S.) per barrel. Now, they’re just below $60.

A drop in crude oil prices will usually show up at the pumps within two weeks, DeHaan said. A rise usually shows up a little bit quicker, as retailers try to build in a little bit more of a profit, he added.