With a trip to the cottage costing you $100 in gas (give or take, depending on your vehicle) heading north is becoming cost-prohibitive for cottagers and renters alike. To help combat the soaring gas prices, Ontario Premier Doug Ford cut the gas tax by 5.7 cents per litre on July 1. The tax cut will remain in effect until December 31, with the possibility of an extension if prices remain inflated.
“People and businesses are feeling the pinch of high gas prices and grocery bills,” says Peter Bethlenfalvy, Ontario’s Minister of Finance, in a statement. “Our government is cutting the gas and fuel tax rates to put money back in people’s pockets and help keep costs down.”
On July 1, when the Ontario government implemented the gas tax cut, prices dropped 11 cents overnight to an average of $193.9 cents per litre. This came as much-needed relief for drivers after gas prices hit a record high of $2.15 in early June.
The province’s dizzyingly high gas prices are the result of low supply and high demand. “We’ve got crude oil inventories down 13 per cent—according to the last U.S. government report—which is not good,” says Roger McKnight, chief petroleum analyst for En-Pro. “That’s why prices went up.”
The reopening of the economy after the COVID-19 pandemic and Russia’s invasion of Ukraine has put constraints on the global supply of gas and oil, driving up inflation rates.
Gas prices in Canada have also been hiked by the federal government’s carbon tax, which was bumped up to 11.05 cents per litre on April 1.
Despite concerns over Ontario’s record-setting gas prices, McKnight says they aren’t likely to last. As of July 7, gas prices in Ontario dropped another 12 cents per litre to $1.79. Again, a relief to drivers, but the underlying cause for the price drop is concerning. Economists are predicting a recession, McKnight says. “Unless there’s some glimmer of hope or some optimism on Wall Street that this recession will not happen, then prices will continue to fall in the short term.”
If a recession does hit, which is possible considering the Bank of Canada continues to raise interest rates, then demand for gas will drop as people lose jobs and attempt to save money.
A recession is a possible outcome that people need to be prepared for, McKnight says. But for the time being, if he were a consumer watching gas prices drop 12 cents per litre or more, “I’d hop in my car and get on with this driving season. I don’t know how long it will last…I can’t see prices spiking or reversing anytime in the immediate future. So, have some fun.”
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