Price gouging? Why gas prices rose right before the consumer carbon tax break

Metro Vancouver drivers are waking up to cheaper gas prices after the province axed the consumer carbon tax.

Gas prices across the province dropped significantly Tuesday morning, thanks to the elimination of the consumer carbon tax.

However, many drivers are not feeling the relief they were expecting at the pumps.

That’s because prices have been surging in recent weeks and have now only dropped to the level they were at just two weeks ago.

Gas prices are currently about 20 cents cheaper than they were on Monday, but because they’ve been climbing in the lead up to this tax break, drivers may still feel like they’re forking out a lot of cash to fill up.

“Rest assured that without the carbon tax pause, prices would be another 17 cents a liter higher than they are today,” said Patrick De Haan, head of petroleum analysis at Gasbuddy.com.

“Unfortunately, a lot of that is being gobbled up by issues that are outside of the control of many Canadians and Americans.”

Those issues include a major oil refinery in California, which supplies British Columbia, being offline due to a fire.

Rising demand for fuel as the weather improves and people begin to travel, plus the switch to a more costly summer fuel blend, are also factors.

“A lot of folks would like to say, well, it’s the carbon tax to be a little bit cynical, that oil companies are somehow gouging. But you know, every study that I’ve done when there’s been a gas tax holiday or a pause, especially the one in Manitoba in 2023, retailers very quickly passed along the decrease,” said De Haan.

The provincial government eliminated B.C.’s 17-year-old consumer carbon tax after a marathon session in the legislature Monday night.

It’s expected to save drivers about 17 cents a litre.

The move was promised by Premier David Eby during last year’s election campaign after mounting pressure from the Conservatives over affordability.

MLAs voted overwhelmingly to cut the tax, with the lone votes against the change coming from the two Green Party members.

Some critics say the NDP didn’t go far enough, since it kept the carbon tax on industrial polluters, which some say ultimately gets passed onto consumers.

“As we all know with what’s going on south of the border, our industries are hurting,” said B.C. Conservative Leader John Rustad.

“They are in very, very difficult times. We need to do everything we can to support them and having an industrial carbon tax makes no sense at this time.”

Rustad says he’s celebrating the tax break, but is concerned how long it will last.

“One of the things we do have to worry about is the piece of legislation for the carbon tax is still there, which means at some point in the future, they could change the table and actually bring the carbon tax back in just like that,” said Rustad, snapping his fingers.

Prices varied in Metro Vancouver Tuesday morning as stations updated their systems to drop the tax.

Some stations reflected the change, while others remained at Monday’s high of 196.9 cents.

Unfortunately, food analysts say lower transportation costs will likely not translate into lower grocery prices.

“There is a phenomenon called opportunity pricing,” said Sylvain Charlebois, director of the agrifood analytics lab at Dalhousie University.

“The private sector will always try to capture that gap left behind by the tax, by any tax. We saw that with the GST holiday and we’re seeing it right now, today, retail-wise, with the elimination of the carbon tax.”

Charlebois says the industrial carbon tax makes Canadian industries less competitive.

“In the U.S., they’re dropping the Paris Agreement. They’re dropping anything that has to do with reducing carbon (emissions). They’ll become more competitive. The temptation to actually import products from the United States will only increase,” said Charlebois.

He believes dropping the industrial tax would stabilize prices.

Better yet, Charlebois says, he’d like Canada to move to a cap-and-trade system.

“You’re empowering companies to recognize carbon markets as an opportunity to make money and so, so if you’re polluting, you pay. If you pollute less, you can get credits and you can sell to polluters,” said the professor.

It’s a policy that he has been recommending to Parliament for years.

“It’s controversial because you’re not necessarily limiting polluters who still want to pollute, but let’s face it, right now, we have a policy in place, the carbon tax, and we have no idea if the carbon tax is actually impacting our carbon emissions at all,” said Charlebois.

The ongoing trade war with the U.S. is the wild card when it comes to gas prices.

Experts say aggressive tariffs could create a prolonged economic slowdown, which could actually lead to lower gas prices for all the wrong reasons.

“During a lousy economy, a lot more folks start to save money,” said De Haan. “They don’t spend as much. They stay closer to home. They may not vacation. Though, because the Canadian and U.S. economies are so really contingent on liquid fuels, when the economy slows down, so does the consumption of fuels, which, in turn, can push prices down.”

In the meantime, De Haan predicts gas prices will drop in the coming weeks as fuel arrives from Asia and will land in the $1.70 per litre range come the summer.