When Alberta fuel tax stopped, expert says prices are in line with market

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Alberta suspended collection of its provincial fuel tax on New Year’s Day, a move that should bring prices at the pump down by about four cents a litre.

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But the lifting of the levy was not immediately matched by lower gas prices at Calgary stations, where prices hovered around $1.30/L on Monday, according to GasBuddy.com. That’s an increase in cost from the end of December, even though the cost of fuel remains at an 18-month low.

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A tax cut doesn’t necessarily mean gasoline prices will fall immediately, said Vijay Muralidharan, an expert on the fuel market.

That’s because factors like the price of crude oil, refinery margins, and retail margins affect prices along with taxes. And he said the removal of the fuel tax coincides with a 12-cent increase in refinery margins, after extreme weather over the holiday season shut down several refineries in the United States.

“There’s been a supply gap, and we’re seeing the effect of that in Canada right now,” said Muralidharan, a director at R Cube Economic Consulting in Calgary.

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“Even though the provincial government granted a reduction in fuel taxes, the refinery’s margins increased more than the fuel reduction, so prices are higher.”

“We will be attentive to the prices”

Muralidharan said there is currently no evidence to suggest that local gas retailers are artificially raising gas prices for additional profit.

That was a message echoed by UCP Service Alberta Minister and Red Tape Reduction Minister Dale Nally in a statement on Monday, saying government monitoring found prices at local stations to be in line with conditions. current on the market.

“However, to protect Albertans, we will be closely monitoring prices,” Nally said. “Businesses found guilty of price gouging can be fined up to $300,000 or receive up to two years in jail.”

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The government has also previously said there is a delay of about two weeks for the impact of changes to the gasoline tax to be felt, due to the gap between when wholesale fuel purchases are made by retailers and when exhausted in the bombs.

Still, the opposition NDP raised concerns about whether fuel tax savings will be passed on to consumers.

“I think the challenge is that we don’t really know if it’s broadcast or not. What we are asking is for the government to do an audit to determine whether or not those savings are being passed through to ensure Albertans are getting the relief they need,” NDP energy critic Kathleen Ganley said on Monday.

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No change in taxes until the first half of 2023

Alberta’s provincial gasoline tax is set at 13 cents a liter, but the UCP government under former Prime Minister Jason Kenney reinstated a tax of 4.5 cents a liter in October after suspending it entirely to beginning of 2022.

The province will not collect the tax until July 1, at which time it will become a fluctuating rate contingent on the price of oil.

In all, the ongoing gas holidays have cost the province $850 million, Finance Minister Travis Toews said last month. He calculated that the tax cut will save average drivers between $160 and $440 over the next six months, depending on the type of vehicle they drive and how often they refuel.

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