Carney is suspending Canada’s fuel excise tax for nearly 5 months

Prime Minister Mark Carney has announced a temporary suspension of the federal fuel excise tax starting next week until Labour Day.

The announcement comes hours after Carney secured a majority government through Monday’s three byelections.

“We’re also removing the fuel excise tax on aviation fuels. This will remove up to $0.10 per liter on gasoline and $0.04 per liter on diesel fuel,” he said at a news conference in Ottawa.

“Combined with our earlier elimination of the consumer carbon tax, our government will have reduced fuel prices on gas by up to $0.28 per liter.”

As a result, Carney said the cost of this measure will be $2.4 billion dollars.

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“We know that Canadians are feeling the pressures of everyday expenses right now. We know they need a boost today and a bridge to tomorrow,” he said.

The suspension is largely due to the ongoing U.S.-Iran war, with movement of shipments along the Strait of Hormuz have mostly been stalled. It will start on April 20 and last until Sept. 7.

Conservative Leader Pierre Poilevre also recently called on the federal government to lift the fuel excise tax, alongside “clean fuel standard and GST surcharges from gas and diesel would save consumers about 25 cents a litre.”

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Poilevre also posted to X on Tuesday afternoon that “Liberal taxes on gas are the reason prices are so much higher in Canada than in the U.S.”

“Mark Carney is just another Liberal. More taxes. More costs. More of the same,” he wrote.

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The average gas prices in Canada is currently sitting at $1.73 per litre, down from $1.81 on Thursday, according to CAA. GasBuddy had put the average price at $1.80 on Friday, down two cents a litre compared to Thursday.

Still, prices remain much higher compared to this time last year ($1.29) and even a month ago ($1.53), according to CAA.

Patrick De Haan, a petroleum analyst at GasBuddy, explained the fuel excise tax as “a layer of taxes on gasoline.”

“Excise tax is basically a use tax on gasoline and diesel and other products, and this excise tax is being paused, which means that gas stations won’t have to collect this tax, which mean that they will likely pass along,” he said.

De Haan also said that while Canadians can expect to see a notable change in prices “pretty quickly” as of next Monday, with an “average savings about four to eight dollars on a gasoline fill up.”

“It’s going to be savings for consumers all summer long,” he said.

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However, NerdWallet Canada’s financial expert Clay Jarvis said in an emailed statement to Global News that the cut might not have the big impact that is expected.

“At first glance, cutting 10 cents a litre from current gas prices doesn’t seem like it’ll have much impact. If you’re filling up a 50 litre tank, you’ll save five dollars. That’s not the kind of discount that’ll help someone pay their mortgage,” he said.

However, De Haan also noted that the diesel drop is expected to be “essentially a 1.8 per cent decrease with Canada’s average diesel price over two dollars a litre.”

Jarvis also agreed that the implications this has on diesel can be “more helpful.”

“Diesel fuels most of our large scale delivery vehicles, and the cost of filling their tanks is making a plethora of goods more expensive. Reducing the cost of diesel isn’t going to take food and clothing prices back to where they were before the Iran war started, but it’ll remove some of the upward pressure.”

De Haan also added that the cut “still doesn’t really tackle the issue that has driven up the price of oil.”

“Unfortunately, situations like this where politicians reduce gasoline taxes actually could exacerbate the problem,” he said. “If oil prices jump later this week, you may not visibly see the gas tax holiday.”