Pain at the pumps? Don't blame the federal carbon tax hike, analyst says
Londoners are feeling pain at the pumps this week, but don't blame the recently hiked federal carbon tax, one analyst says.
The price of regular unleaded gasoline shot up 14 cents a litre in Ontario this week, with average London pump prices Friday morning sitting at $1.736 a litre, just below the Ontario average of $1.739. Prices have spiked by 18 cents a litre in the last month, up from $1.56 in March, according to Gasbuddy.com.
We unpack the reasons why:
WHY ARE GAS PRICES GOING UP?
While the federal carbon tax that rose from $65 a tonne to $80 a tonne April 1, it is not to blame for spiralling gas prices in London and across Ontario.
“The increase this week has virtually nothing to do with the carbon tax — having gone up in early April, it has been passed along for last couple of weeks,” said Patrick De Hann, gasbuddy.com's head of petroleum analysis.
“The increases we're seeing across much of eastern Canada right now are related to seasonal changes . . . in the gasoline supply.”
Gas stations switch to cleaner gas every spring and summer, as mandated by the federal government, he said.
“Much of the rest of Canada had already made that transition and it does vary from region to region,” he added.
COULD PRICES GO DOWN?
Technically, yes. When there is a glut of petroleum on the market, discounts occur.
Big price jumps are much more noticeable this year because “an excess of gasoline in the winter led to discounts,” De Hann said.
“When transitions occur. you may go from . . . a lavish supply of (winter) gasoline, to a very tight supply of summer gasoline, which . . . the case was here,” he said. “That's why there is such a big jump in price.”
WHAT ELSE IS PUMPING UP PRICES?
Crude oil prices reached US$85 a barrel on April 3, the highest since October, media reports say.
“About 90 to 95 per cent of the increase you have been witnessing at the gas pump this week is because of the changeover from winter to summer,” De Hann said.
“The (rest) may be due to the fact oil prices last week climbed to their highest since October.”
WHERE IS GAS CHEAPEST?
The province's lowest prices can be found in Thunder Bay, where they hovered near $1.47 at one outlet, says gasbuddy.com.
WHAT ELSE ARE CONSUMERS PAYING FOR?
■ GST and federal excise tax: 10 cents a litre.
■ Provincial tax: about 15 cents.
■ Carbon tax: about 20 cents Retail margin: usually eight to 10 cents.
■ Cost of refining: About 30 per cent of total.