What explains the differences in gas prices between Canada and the U.S.?
- Taxes account for the majority of the difference in gas costs between Canada and the United States.
- Gasoline taxes differ by state and province, as well as at the national level.
- When taxes are removed, the pricing in Canada and the United States are comparable.
What factors account for the major gas price difference between Canada and the U.S.[edit]
Taxes on gas in Canada is much more than what the United States[edit]
A part of the ultimate price Canada Residents pay for gasoline and other fuels at the pump is allocated to different levels of government in the form of direct or indirect taxes. Depending on consumers' location, they may be required to pay a federal, provincial, and local tax on these items, in addition to a federal gasoline tax.[1]
Fixed taxes on gas in Canada[edit]
The federal government imposes a flat excise tax of 10 cents per liter on gasoline and 4 cents per liter on diesel. Provincial governments also collect taxes on gasoline and diesel, which vary significantly across provinces. Vancouver, Victoria, and Montreal are three Canadian municipalities that also pay additional taxes on gasoline.[2]
Sales tax on gas in Canada[edit]
This tax is calculated as a percentage of the retail value, using the ad valorem technique. On crude oil, refining, and marketing expenses and margins, the federal excise tax, appropriate federal and provincial carbon levies, and provincial road charges, the federal GST/HST is imposed. Fuels like gasoline and diesel are exempt from provincial sales taxes unless they are subject to the harmonized sales tax (HST) or are sold in Quebec (QST).[3]
| Federal and Provincial Consumption Taxes on Petroleum Products | ||||
|---|---|---|---|---|
| Gasoline | Diesel | Propane(motor vehicle) | Furnace Oil/ Natural Gas (for heating) | |
| Federal Taxes | ||||
| Excise Tax (Cents/Litre) | 10.0 | 4.0 | - | - |
| Goods and Services Tax | 5% | 5% | 5% | 5% |
| Provincial Sales Tax (PST or HST) (1) | ||||
| Ontario | 13% | 13% | 13% | 13% |
| Quebec Sales Tax (QST) | 9.975% | 9.975% | 9.975% | 9.975% |
| Nova Scotia (2), Newfoundland and Labrador, New Brunswick and Prince Edward Island | 15% | 15% | 15% | 5% |
| Provincial Fuel Taxes (Cents/Litre) | ||||
| Newfoundland and Labrador (3) | 7.5 | 9.5 | 7.0 | |
| Prince Edward Island | 8.47 | 14.15 | ||
| Nova Scotia | 15.5 | 15.4 | 7.0 | |
| New Brunswick | 10.87 | 15.45 | 6.7 | |
| Quebec (4) | 19.2 | 20.2 | ||
| Ontario (5) | 9.0 | 9.0 | 4.3 | |
| Manitoba | 14.0 | 14.0 | 3.0 | |
| Saskatchewan | 15.0 | 15.0 | 9.0 | |
| Alberta (6) | 0 | 0 | 0 | |
| British Columbia – Vancouver Area (7) | 27.00 | 27.50 | 2.7 | |
| British Columbia – Victoria Area (7) | 20.00 | 20.50 | 2.7 | |
| British Columbia – Rest of province (7) | 14.50 | 15.00 | 2.7 | |
| Yukon | 6.2 | 7.2 | ||
| Northwest Territories (8) | 10.7/6.4 | 9.1 | ||
| Nunavut | 6.4 | 9.1/3.1 | ||
| Federal and Provincial Carbon Levies | ||||
| Alberta, Saskatchewan, Manitoba, Ontario, New Brunswick, Yukon, Nunavut (9) | 11.05 | 13.41 | 7.74 | $2.628908/GJ (9.79 - cents/m3) |
| British Columbia | 11.05 | 13.01 | 7.74 | $2.5588/GJ (9.79- cents/m3) |
| Newfoundland and Labrador | 11.05 | 13.41 | 7.74 | $2.628908/GJ (9.79 - cents/m3) |
| Nova Scotia (10) | 1.1 | 1.3 | 0.7 | $0.2352/GJ (1.2 - cents/m3) |
| Prince Edward Island | 11.05 | 13.41 | 0 | 0 |
| Quebec (11) | 5.66 | 7.21 | 3.70 | $1.1840/GJ (4.53 - cents/m3) |
| Northwest Territories (12) | 11.7 | 13.7 | 7.7 | $2.5778/GJ (9.6 - cents/m3) |
Canada Dollar gas price is often compared with United States Dollar gas price[edit]
Taking into account the exchange rate, one Canadian dollar is equivalent to about 77 U.S. cents. It is often observed that gas prices in the Canadian dollar are directly compared to gas prices in USD, which is not an ideal way to compare the price of gas in the two countries.[4]
The cost of gasoline in Victoria, which is the capital city of British Columbia, soared to $2.32 a liter in June 2022, which is equivalent to $8.77 per gallon when converted to Canadian dollars. That works out to $6.81 a gallon when converted to US dollars.[5]
Stronger United States Dollar vs Canadian Dollar[edit]
Right after Covid-19, United States Dollar has soared to all-time high, whereas the Canadian Dollar has weakened in this duration. The gas price is measured in USD, and a weakened currency value further creates a difference.[6]
Canada doesn't produce enough gas to meet its needs[edit]
The shortage of petrol available in the Lower Mainland and Vancouver Island is also contributing to more imports. Canada is unable to generate enough goods to satisfy its own need. The little supply that they have in Canada comes either from the overburdened Trans-Mountain pipeline or from the Burnaby-Chevron refinery, which is now known as the Parkland refinery.[7]
References[edit]
- ↑ "Why is Gasoline More Expensive in Canada Than the United States?". DaveManuel.com. Retrieved 2022-10-26.
- ↑ "Why Gasoline Prices Vary Across Canada". www.nrcan.gc.ca. Retrieved 2022-10-26.
- ↑ "Selected Excise Duties in OECD Countries". www.oecd-ilibrary.org. Retrieved 2022-10-26.
- ↑ "Are Canadians Paying $9 USD Per Gallon for Gas?". Snopes.com. Retrieved 2022-10-26.
- ↑ Washington, District of Columbia 1800 I. Street NW; Dc 20006. "PolitiFact - No, gas in Canada isn't $9 per gallon". @politifact. Retrieved 2022-10-26.
- ↑ "USD/CAD (U.S. Dollar/Canadian Dollar) Definition". Investopedia. Retrieved 2022-10-26.
- ↑ "5 reasons why gas prices are higher in Canada compared to the U.S." CHEK. 2018-02-28. Retrieved 2022-10-26.