Alberta drivers hoping for some relief at the pumps will be eager to hear whether the provincial government will ease the fuel tax.
Under Alberta’s relief program, quarterly reductions to the provincial fuel tax are introduced when the price of the American benchmark crude oil, West Texas Intermediate, averages at least US$80 per barrel over a review period of 20 trading days.
On this past Saturday’s edition of her show Your Province, Your Premier that airs on Corus radio stations, Danielle Smith says the monitoring window closes on Tuesday.
“The window that we monitor is from mid-May until mid-June, and so we’ll have an announcement next week once we see where that number landed for the month,” Smith said Saturday.
Alberta’s fuel tax is 13 cents per litre for regular gas, and four cents per litre for marked gasoline and marked diesel.
Under Alberta’s gas tax relief program, quarterly reductions to the provincial fuel tax are introduced when WTI averages at least US$80 per barrel over a review period of 20 trading days.
Between $80 and $89.99 per barrel of oil, the province provides tax relief of between 4.5 cents and 9 cents per litre of gas.
When oil hits $90 per barrel the fuel tax is suspended. But when the price falls again to below $80 per barrel, there is no fuel tax relief.
The fuel tax review period is based on 20 trading days, which was scheduled before the June 16 deadline. Any adjustment resulting from that review would take effect on July 1.
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Between the most recent May 18 to June 15 monitoring window, the average price of WTI crude oil fluctuated between $80 to $104 US per barrel.
According to GasBuddy, the average gasoline price in Edmonton is at about $1.53 per litre, and in Calgary is about $1.59 per litre.
In May, Albertans saw record-breaking gas prices, averaging at about $1.89 per litre.
Oil prices jumped weeks after war broke out between the United States and Israel with Iran, and when the Strait of Hormuz, which is a critical passageway for oil, was mostly blocked.
Now that a peace deal has been reached between the United States and Iran, the price of oil is expected to fall.
The increase in oil prices also boosts the Alberta government’s bottom line, as resource royalties are a major source of income.
Alberta-based Concordia University Economics professor Moshe Lander says while some consumers want relief at the pumps, it’s better to keep the tax in place in order to balance the Alberta budget.
“If they suspend the tax, then they are foregoing revenue in exchange for cheap popularity. It’s a short term success,” Lander explained.
“You have a few months of extremely high oil prices that were above what was forecasted. It’s not like you were in a good financial position to begin with.”
In February, former provincial Finance Minister Nate Horner projected a $9.4-billion deficit with a forecasted oil price of $60 per barrel.
Lander said the province would have generated extra revenue due to high oil prices, but it would not be enough to close the projected deficit.
“If you want to help Albertans, the easiest way to do it is to cut everyone a $400 cheque called the ‘Ralph Bucks Part 2’,” Lander said, referring to the Alberta Prosperity Bonus from 20 years ago.
The one-time $400 payment to Alberta residents in 2006 was due to a massive surplus from oil royalties.
“Send it to everybody and let people spend the $400 on what they want.”
In April, the federal government announced the suspension of the federal fuel excise tax. Until Sept. 7, the tax of 10 cents per litre on gas and four cents per litre on diesel is removed.
Alberta suspended its fuel tax for six months at the beginning of 2023 to help residents with costs due to pandemic-related inflation.
The discount was extended to the end of that year before being reinstated Jan. 1, 2024, as energy prices softened.
However, Premier Smith believes there are alternatives to keep gas prices low.
“The real way that you bring gas prices down is the normalizing and stabilizing of that supply, and getting more supply into market, which is what we are working on doing,” Smith said on her radio show this past Saturday.
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