When Prime Minister Mark Carney’s temporary suspension of the federal fuel excise tax went into effect on Monday — aiming to lower gas prices by about 10 cents a litre across Canada — not everyone in Quebec was thrilled about it.
In fact, despite Quebecers paying among the highest fuel prices in North America, some experts told CBC they think the federal government’s fuel tax reprieve is a terrible idea.
Others believe it was absolutely the right thing to do. And there are those who’d like to see Quebec Premier Christine Fréchette follow suit.
Here’s how the debate is breaking down.
‘A very bad policy’
For Hadrian Mertins-Kirkwood, a senior researcher in Climate & AI for the Canadian Centre for Policy Alternatives (CCPA), the politics of the move make sense in the short term; but not necessarily the policy.
He and other policy experts believe there are better solutions that could have been used to alleviate Canadians’ affordability concerns, which have been exacerbated by the U.S. and Israel’s war with Iran.
“If you’re really concerned [about] gas prices,” Mertins-Kirkwood said, “you could put a cap on gas prices and force the oil companies to eat the difference.”
The oil industry is profiting $10 million every day because of the war in the Middle East, according to recent modelling by CCPA. That could mean profits as high as $90 billion for the industry this year.
“We could tax that,” explained Mertins-Kirkwood through an “excess profits” or “windfall” tax. The government could then use that money to improve affordability for Canadians.
Though this would likely be considered more “interventionist” than this government is willing to be, he acknowledged.
Normand Mousseau, the scientific director of the Institut de l’énergie Trottier (IET) at Polytechnique Montréal, believes what the government has chosen to do amounts to “populism and laziness.”
“I think it’s a very bad policy,” he said.
Energy policy specialist Pierre-Olivier Pineau agrees. He’s a professor at HEC-Montréal and the Research Chair in Energy Sector Management.
“We basically will give money to people who don’t really need that money,” said Pineau of the estimated $2.4 billion that it will cost the federal government to suspend the gas excise tax for five months.
He points out that more people than ever are buying SUVs; and if people can afford those vehicles, they can also likely afford the gas for them.
“We need to be sure we help the right people,” Pineau said, adding a better use of the government’s money would be to subsidize people with lower revenues to buy electric cars.
With much of the province’s road system needing fixing, Pineau said if anything, Quebecers should consider paying even higher gas taxes to better fund road maintenance, in addition to helping fund better sustainable transportation systems.
‘Good short-term solution’
There are, however, consequences to higher fuel prices.
Transportation accounts for between 10 to 20 per cent of the cost of food we consume, according to agricultural economist Pascal Thériault. He’s the director of McGill’s Farm Management and Technology Program.
“An increase in fuel price will keep driving cost of food higher,” he explained. “So the more it costs to transport the food, the more consumers will pay for food.”
If fuel prices continue to rise, Thériault said grocery stores may actually stop carrying certain foods with lower profit margins because it will become too costly, and not profitable enough, for them to be brought in.
Carney’s fuel tax suspension is therefore a “good short-term solution” in Thériault’s perspective — as long as oil companies don’t absorb the cost.
As Pineau explains, just because gas stations now have less tax to pay the government doesn’t mean they’ll reduce the price of gas by exactly 10 cents for consumers.
“They still have the right to price the gasoline at whatever level they want.”
Should Quebec follow suit?
The cost of gas in Quebec is among the highest in Canada, in part because there is a higher provincial fuel tax — about 19.2 cents per litre — which is about 10 cents more than the provincial fuel tax in Ontario. In Montreal, drivers also pay an extra three cents per litre to help fund public transit.
During her leadership campaign, Quebec’s new premier Christine Fréchette said she would consider returning the additional tax revenues it collects from higher gas prices by reducing the cost of vehicle registrations in Quebec.
After meeting with the province’s finance minister, Eric Girard, Fréchette said they’re looking at what can be done in the short term, and that nothing is off the table.
“The money needs to stay in people’s pockets,” she said last Wednesday. “Not end up in the gas stations’ pockets.”
Another contributing factor to Quebec’s higher gas prices is the province’s cap-and-trade emissions pricing system, which adds roughly eight cents a litre to the cost of fuel in Quebec.
So when Carney scrapped the carbon tax for Canadians as one of his first orders of business as prime minister last April, Quebec was the only province that didn’t see a price difference at the pump.
The Canadian Taxpayers Federation considers the cap-and-trade program to be a “carbon tax” and is calling on Fréchette to eliminate it, and cut the provincial gas tax.
Éric Duhaime, the leader of the Conservative Party of Quebec, would also like to see Quebec withdraw from the carbon market, which the party considers a tax.
According to a Léger poll conducted for Québecor media properties last May, 56 per cent of Quebecers who were surveyed said they’d like to see the province end its cap-and-trade carbon-pricing system.
