Fuel Tax Cuts Deliver Savings to Consumers, Not Oil Companies

Gas prices are on the rise again, reaching $1.90 per litre on average and over $2 in some areas of Canada.

In response to the high fuel costs, governments have taken steps to cut taxes and reduce prices for consumers. Alberta has fully suspended its 13-cent-per-litre fuel tax as of October 1, while Ottawa will extend its own 10-cent-per-litre suspension until January 2027 with a gradual phase-back and full return by April 2027.

The Conservative leader Pierre Poilievre wants to go further, removing other taxes and regulatory burdens on refineries. However, the NDP leader Avi Lewis argues that these tax cuts are a 'costly handout' to oil companies, claiming they would benefit from the reduced costs.

However, evidence suggests that consumers are the ones who gain the most from fuel tax reductions. When Ottawa suspended its federal consumer carbon tax in 2022 and Quebec never had it, prices fell by the full amount of the tax cut. Similarly, when Manitoba suspended its provincial gasoline tax in January 2024, prices dropped immediately.