Record gas prices may force federal, provincial gov’ts to act to offer relief: expert

With the price at the pump continuing its record rise across Canada, federal and provincial governments may have no choice but to offer some form of relief.

While they have limited options to deal with the soaring price of gas around the world, so far there haven’t been many attempts by governments in Canada to reduce the burden on drivers.

But if the record rise doesn’t slow down, former Parliamentary Budget Officer Kevin Page says they may be forced to act to address a potential affordability crisis.

“These are tough times for consumers, I think because their personal disposable incomes are getting stretched in different ways. It is gas, but it’s also food, it’s shelter,” he told CityNews.

“The gassing prices in Canada can go much higher and we’re seeing increases on a year-over-year basis, 30, 40 per cent. Then I think the government is like, this is now a potential crisis,” Page continued.

Some provinces have seen prices pass $2.20 per litre for regular gas in recent days. Many analysts don’t see the situation improving too much in the coming months.

“In the long term, I can’t see this thing settling down until such a time as the geopolitics are sorted out on the other side of the Atlantic and our supply situation, in so far as crude oil, and gasoline, and diesel is concerned, gets sorted out on this side of the Atlantic,” said senior petroleum analyst Roger McKnight at En-Pro International.

“It doesn’t look very good.”

Page notes there are also international efforts to increase supply and production.

Russia’s war in Ukraine on the heels of the pandemic is driving the recent spikes, and Page notes there’s a moral context here, saying we pay with our pocketbooks but Ukrainians are paying with their blood.

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Page notes there are policy tradeoffs for higher gas prices, like a boost to the energy sector, increased revenues for government programs, and forcing more people to reduce their reliance on fossil fuels.

Here at home, federal and provincial governments have the option to reduce excise sales or carbon taxes for businesses and consumers.

B.C. is offering a one-time rebate, while in the Ontario election, there are promises of tax cuts. In Alberta, the provincial government announced in March that it was dropping its 13-cent fuel tax as of April 1 to help motorists deal with the effect of high prices at the pump.

However, McKnight notes giving drivers “some relief” through temporary tax breaks isn’t a permanent solution.

“That’s only going to come back and be refreshed. The only way to get prices down, and it’s a brutal thing to say, but you have to have what we call demand destruction. You have to shut down demand so that we can get the crude oil inventories up, we can get the gasoline inventories up, we can get the diesel inventories up. If you’re using less of the stuff, then the inventories build and the price comes down,” he explained.

“If you’re going to artificially just lower the price for political reasons, that’s not going to help at all. It’s a very difficult thing to do. You have to divorce yourself from the lore of gasoline as your fuel.”

McKnight adds there’s a misconception that gas prices are “made in Canada.”

“The border does not exist when it comes to gasoline prices. If prices go up south of the border … then the prices change north of the border. There is no control on that whatsoever. Gasoline and diesel flows back and forth across the border, at will, depending on where the price advantage is.”