Global Supply Shortages Keep Canadian Gas Prices High Despite Tax Relief
Canadian gasoline prices remain elevated as global refinery disruptions and geopolitical conflicts counteract federal and provincial fuel-tax breaks. Bank of Canada Governor Tiff Macklem noted crude oil is nearly US$40 higher per barrel than previous levels, while experts warn that potential U.S. export bans could further surge costs.
Canadians hoping for relief at the gas pumps are unlikely to see it soon, as global supply shortages continue to drive up prices and counteract Ottawa’s fuel-tax breaks. On Friday, the average price of unleaded gas across Canada was $1.81 per litre, ranging from $1.557 in Alberta to $2.156 in Newfoundland.
Bank of Canada Governor Tiff Macklem stated at a Halifax Partnership event on Sept. 21 that damage to worldwide refining capacity has caused gains in fuel prices. According to Mr. Macklem, current gas prices reflect a crude-oil price that is almost US$40 higher per barrel than previous levels. Russia’s invasion of Ukraine and the virtual halt in tanker traffic through the Strait of Hormuz due to the war in Iran have kept crude prices elevated. Brent crude prices rose about 39 per cent since late February, when the U.S. and Israel launched attacks on Iran, leading to choked oil shipments from Persian Gulf states.
To ease fuel costs, G7 countries announced plans to immediately release 100 million barrels of oil, beginning with diesel. Following the announcement, the price of global benchmark Brent crude fell slightly but recovered to about US$102 a barrel by Friday afternoon.
Prime Minister Mark Carney announced an extension to the removal of the federal fuel excise tax on gas through Jan. 31, with 50 per cent off the tax through March 31. The removal of the federal fuel excise tax cuts 10 cents per litre off the retail price. Additionally, Alberta has paused a 13-cents-per-litre gas tax until the end of the year.
Despite these measures, experts warn that underlying market forces continue to elevate costs. Jim Mitchell of Wood Mackenzie stated that crude oil makes up 50 to 60 per cent of the retail gas price and that a shortage of global refinery capacity is also a major issue. Russian refinery output in June reached its lowest level in more than 20 years due to Ukraine’s frequent drone strikes on Russia’s oil refineries. As a result, European oil markets are disrupted by reduced Russian refinery output. Russia shifted from exporting around two million barrels a day of refined product to importing about 100,000 barrels a day in late August and early September.
Global diesel supplies are squeezed, impacting Europe and other regions. Persian Gulf refineries are producing about one million barrels less of diesel a day than before the war in Iran erupted.
Fuel prices could remain inflated for an extended period due to geopolitical tensions and potential U.S. export bans. Rory Johnston warned that if U.S. President Donald Trump proceeds with a ban on exports of fuel, it could cause global prices to surge by as much as 100 per cent.