Carbon tax not the villain when gas prices spike

CHELSEA, QUE.—The federal carbon tax—a central actor in budding pre-election drama—is actually a bit player when it comes to its impact on the economy and even on individual drivers. Not exactly much-ado about nothing, but hardly worthy of the angry clamour on one side and the earnest panegyrics on the other. Nor does the tax have much to do with the ricocheting price of gasoline. Long before anyone heard of a carbon tax, and especially in recent decades, prices at the pump have vacillated wildly, often increasing as much as 10 cents a litre in the span of a drive across town. From province to province, there are huge variations, even from city to city. Also, from winter to summer. Sudden hikes in the pump price just before weekends are well-known and widely-resented. Alberta Premier Jason Kenney, left, is waging a holy war against the federal carbon tax, his government collects 13 cents a litre fuel tax. Not, apparently, a 'job-killer' if the province reaps the revenues. Ontario Premier Doug Ford vowed to take the matter up of gas prices with the oil companies when he was first elected, but since then—silence from Ford and gas prices keep spiking on Fridays to the irritation of the cottage-bound. The Hill Times photographs by Andrew Meade Indeed, Ontario Premier Doug Ford vowed to take the matter up with the oil companies when he was first elected, but since then—silence from Ford and gas prices keep spiking on Fridays to the irritation of the cottage-bound. None of this has anything to do with the new carbon tax; it is a historic pattern. In fact, the average gasoline price in Toronto in June of this year was a relatively modest $118.9 a litre, according to Statistics Canada, compared to June 2018, before the carbon tax, when it sat at $134.6 a litre. True, Ford immediately cut 4.3 cents from the price of a litre of Ontario gas when he eliminated the previous government’s cap-and-trade regime, but that was recently replaced by the federal carbon tax almost to the penny. Even so, the pump price was markedly lower this spring, largely because of turbulence in international oil markets. In fact, Statistics Canada reports a 9.2 per cent drop in gas prices across the country this summer, despite the April imposition of the federal carbon tax on four provinces without their own plan: Ontario, Saskatchewan, New Brunswick, and Manitoba. Some attribute the price drop to the Trump-China trade spat, which has slowed the Chinese economy and led to a global slump in demand for oil. In fact, everything affects the price of oil: hurricanes, the U.S. boycott of Iranian and Venezuelan oil, refinery accidents, new regulations eliminating high-sulphur fuels in ships (which increases demand for higher-quality fuel thereby pushing up prices for refined product generally.) The big oil companies are always blaming their eye-popping overnight price hikes on refinery maintenance, or other unexpected disruptions in supply, which always seem to occur just before weekends. By another co-incidence, all the gas stations in one area, even on one block, raise their prices in unison, except in some larger centres where there is more competition and a few station operators willing to accept a loss at the pumps in an effort to boost volume. Many investigations into this apparent price-fixing have failed to turn up evidence of collusion. Instead, this cartel-like behaviour has become organic. It is just the way the industry operates. Drivers who live in small towns don’t even have the fiction of competition; if there is only one station, they pay whatever the station charges. And the more remote the location, the more it costs to transport gasoline from refineries which also adds to cost at the pump. That said, the carbon tax, in the four provinces affected, will add a fixed 4.4 cents to the price of a litre of gasoline, increasing to 11 cents per litre by 2022, if the Liberals stick to their plan. (If the Conservatives whip up sufficient outrage, the Trudeau government may abandon the laddered increases; as it is, they are unwilling to commit to further hikes after 2022, without which the carbon tax becomes much less effective in steering drivers to greener alternatives.) Overall, however, the carbon tax is a trifling addition to cumulative taxes—federal, provincial and municipal—on gasoline. Ontario, for example, imposes a 14.7 cent fuel tax on every litre sold in that province. The Ford government has shown no interest in helping overburdened drivers by slashing its tax. As for Alberta, where Premier Jason Kenney is waging a holy war against the federal carbon tax, his government collects 13 cents a litre fuel tax. Not, apparently, a “job-killer” if the province reaps the revenues. In 2005, the Paul Martin government dedicated a portion of the federal fuel tax to municipalities—an amount the Trudeau government doubled, in the last budget, to $2.2-billion. The Hill Times file photograph The federal government has also had 10 cent excise tax since 1995. In 2005, the Paul Martin government dedicated a portion of the federal fuel tax to municipalities—an amount the Trudeau government doubled, in the last budget, to $2.2-billion. Municipalities, who are limited mostly to property taxes and user fees to raise revenues, increasingly depend on the federal gas transfer for everything from arts programming to infrastructure repair. Yet there is no evident opposition—not from Conservative Leader Andrew Scheer, not from provincial premiers—to this 10 cent-per-litre federal 'money grab.' The Hill Times photograph by Andrew Meade Yet there is no evident opposition—not from Andrew Scheer, not from provincial premiers—to this 10 cent-per-litre federal “money grab.” All the political venom is directed at one of the smallest fuel taxes—and despite the fact that all money raised by the carbon tax goes back to individuals in tax rebates. (Scheer is even condemning a proposed federal Clean Fuel Standard, which could add mere pennies to a litre to gasoline after 2023—all in the interests of lowering tailpipe emissions by including more ethanol in the mix.) It is true that the only province with a carbon tax, British Columbia, also has the highest gas prices in the country, excluding the North. Last May, prices hit $170, prompting John Horgan’s NDP government to establish an inquiry. But prices in Vancouver have always been higher, due to supply problems, the elevated cost of living and of land, and the fact that the federally-owned Trans Mountain Pipeline does not make a priority of carrying Alberta product to the lower mainland for local consumption. As to the provincial carbon tax, which has been frozen since 2012, it initially lowered emissions and—along with a temperate climate—increased demand for electric vehicles. Which is what a carbon tax is supposed to do. The only conclusion is that florid opposition to the federal carbon tax has less to do with protecting hard-pressed consumers, than with defending the oil industry’s ongoing right to pollute. Susan Riley is a veteran political columnist and regular contributor to The Hill Times. The Hill Times