High Gas Prices, Explained
Ben Nelms/CBC
Since March of this year, gas prices across Canada have been skyrocketing. In response, several provinces have made an effort to lessen the financial strain on Canadians.
The price of gas was raised by 7 per cent in March, making it the hig est it has been since 2014. Compared to March 2021, the price had increased nearly 50 per cent. Alberta’s gas, being the cheapest in Canada, costs $1.569 per litre. However, for Albertans, this was still double the price that gas had been during the most inexpensive time of the pandemic. Meanwhile, British Columbia’s gas reached an all-time high of $2.149 per litre in early March. At the time, this was the highest price for gas in all of North America.
There are many factors that contribute to the high demand and low supply of gas. As events and workplaces return to being in-person, the demand for gas by commuters continues to increase. This has led to record gas prices of over $1.609 per litre in some parts of Ontario.
Additionally, the supply of gas still falls below pre-pandemic levels. Due to the low demand for gas during COVID-19, many companies are still producing lesser amounts of it than they were prior to the pandemic. The United State’s shale oil production is focusing on returning money to their shareholders rather than growing their companies, which has contributed to the short supply of gas. Starting new oil extraction plants is expensive and takes time, which is why supply cannot be increased by simply extracting more oil.
The conflict between Russia and Ukraine has also contributed to the imbalance in supply and demand for gas. In response to Russia’s invasion of Ukraine, several sanctions have been placed on them, including one on crude oil. Despite Canada banning importing Russian crude oil, most of Western Europe did not participate in this sanction because of their reliance on Russia’s oil. As a result of the sanctions, Russia’s oil sales have suffered. Even after dramatically lowering the price, over 70 per cent of the oil Russia produces goes unsold. The sanction on Russian crude oil has caused an increase in demand for oil produced elsewhere, contributing to an increase in gas prices.
Compared to the rest of Canada, British Columbia is experiencing drastic spikes in the price of gas. This is a result of their lack of pipelines, which easily transport the resource, and therefore lower its prices.
Provinces have taken different approaches to help Canadians through this financially-difficult time. In early March, Alberta announced a plan to reduce taxes on gas by 13 cents per litre. However, not long after this was implemented, the price of gas naturally rose 14 cents.
New Brunswick has used different methods to support their citizens. They have left the price of gas untouched and instead are increasing the carbon tax. The money from the carbon tax will be rebated to all taxpayers by raising the threshold for income that is provincially tax-free.
In British Columbia, a rebate has been issued by the Insurance Corporation of British Columbia (ICBC). Announced by Premier John Horgan on March 25, drivers with a basic automobile insurance policy will receive a one-time rebate of $110. Commercial transportation drivers will receive $165. This also applies to owners of electric vehicles, however those who do not need the money are encouraged to donate it.
The decision to introduce a rebate rather than another form of financial relief was settled on after much thought and deliberation. After what happened in Alberta, Premier Horgan stated, “we were reluctant and would not amend the taxation because it would just be filled by an increase in prices at the pump”. Although the rebate is expected to cost over $395 million, Horgan explained “we’ve gone back to ICBC (for the rebate) because of the strong financial position they find themselves in”.
The BC Liberals party (opposition) find the rebate “underwhelming”. They have criticized the fact that electric vehicle owners also receive a payment, despite not having to pay for gas. Peter Milobar, the official opposition critic for finance, argued that the “insurance rebate [is] being painted as if it’s a gas tax rebate, which it certainly is not.”
The rebate will be given to drivers between May and July of 2022. Those who have signed up for direct deposit will receive the payment as early as May. Drivers who pay for their insurance using a credit card will receive the rebate as credit between May and June. All others will be given cheques starting in June. Each driver will receive a letter of confirmation from ICBC once their rebate is issued.