Should the carbon tax be revised?

At the time of writing, the Canadian dollar was worth U.S. 0.74 cents. In other words, it cost Can$1.35 to buy one U.S. dollar, and the retail cost of gasoline was Can$1.71 per litre.

Many items are priced in U.S. dollars. For example, gold, silver, crude oil and other commodities are quoted in U.S. dollars. When we buy gold, silver, crude oil, etc. we pay 35 per cent more in Canada for these listed items.

Crude oil (WTI) trades at U.S. $79.81 per barrel. In Canada, the equivalent price is Can$107.70.

If a refinery processes one barrel of oil, many distillates are produced including gasoline. The amount of gasoline produced is the equivalent of about half a barrel. The exact mix of distillates depends on the operating conditions, which is why many refineries stop producing distillates twice a year to maximize gasoline production in summer and maximize fuel oil and kerosine in winter.

Assuming half of the distillate is gasoline, one barrel of oil will produce about 79 liters of gasoline. (One U.S. barrel of oil is defined as 159 litres.)

The operating cost to produce 79 litres of gasoline is Can$107.70. The operating cost to produce one litre of gasoline is Can$1.36.

Keep in mind that other distillates are produced in making gasoline, e.g. fuel oil, kerosine, gases, lubricants, etc., which are sold separately. Therefore, the net cost of producing one litre of gasoline is Can$0.68 (half of Can$1.36).

Yet in this province, the retail cost of gasoline is Can$1.71 per liter, a 60 per cent increase over net cost. Why the high markup? Taxes, mainly. The taxes are:

• Carbon pollution price (increases annually)

• Federal excise tax

• Provincial excise tax

• HST

Excluding Nova Scotia and parts of British Columbia, this province has the highest taxes on gasoline.

The carbon pollution tax is the worst tax as it increases annually so guaranteeing an annual increase in inflation. Inflation is heavily dependent on retail fuel prices. As most of products sold in Newfoundland and Labrador are imported, the costs of ferry, tractor-trailer, and air transportations are built into these products.

The carbon tax was supposed to be an incentive for people to use electricity. For example, nationally, most homes are heated by burning natural gas or home heating oil or wood. Carbon taxes and cash costs of burning each of these fuels is different leading to anomalies in the system. Converting to electric heat would decrease the consumption of fossil fuels.

By increasing the use of electricity, the electric grid needs a greater supply of electricity. By electrifying transportation, there will be a further demand for electricity.

All the Atlantic provinces and Quebec will need more electricity in the near future. This province is already running short of electricity; the Iron Ore Company of Canada cannot expand further in Labrador as the grid there is maxed out.

Quebec needs to expand its sources for electricity for export; it has already made contact with this province about the Gull Island possibility. New Brunswick has had to upgrade its nuclear plant and needs to upgrade it further. Nova Scotia is relying on this province for some of its electricity.

Why has the federal government not been puting more effort into electricity generation than implementing a carbon tax, a fourth tax on gasoline? As a reminder, the carbon tax on gasoline is expected to increase again next month by 17 cents per litre.

The wind farm in South West Newfoundland does not count, as the electricity generated there will be used to produce hydrogen and/or ammonia.