This article first appeared in the Western Standard

Canada’s temporary gas tax relief is political window dressing. If Ottawa wants to bring down gasoline and diesel prices, it needs to tackle GST, costly regulations, and the policies driving up energy costs.

The Carney government has announced that it will be extending its suspension of the federal fuel excise tax — the “gas tax” — which has been in effect since April. That tax adds 10 cents per litre to gasoline and 4 cents to diesel, and was supposed to be reimposed on September 8. It will now remain suspended until January 31, when it will return at 50% of the normal rate before returning in full next April.

According to the Prime Minister, this move will “lower costs at the pump” and put “more money in your pocket,” and that’s true as far as it goes. 

Here’s the problem: it doesn’t go very far at all. 

As you’ve no doubt noticed, gas prices are way up. Diesel even more so. In fact, one day after this announcement, diesel prices across Canada hit record highs. In the GTA, it costs $2.439 per litre, and Vancouver is seeing prices as high as $2.85 per litre.

Skyrocketing fuel costs drive up the cost of living for all of us, making it harder not just to fill up our cars, but to buy groceries and other goods. That’s especially true for diesel, which is the lifeblood of the modern economy. High diesel prices make it more expensive to run the farm equipment necessary to produce our food, along with the trucks that transport it to market. 

That difference is made up by the consumer. Which is to say, you and me.

Now, you might say, at least they’re doing something!

Except that the gas tax is a drop in the bucket, compared to all the other taxes, policies, and regulations the government imposes that artificially inflate the price of fuel. Suspending it is pure eyewash.

First of all, they should repeal the gas tax altogether. A temporary suspension may slightly lower the price at the pump today, but it fails to address the future cost that businesses and markets have to continue to price in.

But there are more effective ways of addressing elevated fuel prices. 

For one thing, the government should exempt gasoline and diesel from GST.

Remember, the gas tax is a fixed charge: 10 cents per litre of gasoline and 4 cents per litre of diesel, regardless of what the underlying fuel costs. GST, on the other hand, is calculated as a percentage of the price at the pump.

Worse still, the GST is applied not only to the underlying price of fuel, but also to other taxes and levies charged on it as well!

In other words, the government collects more tax revenue when the price of fuel goes up. They are, in effect, benefiting from this crisis.

That is outrageous. 

Right now, eliminating the federal GST on fuel would provide substantially more relief than the four-cent-per-litre diesel tax suspension. At current prices, a 5% GST represents roughly 12 cents per litre on diesel selling for $2.44.

But taxes aren’t the only reason Canadians are paying so much for fuel. The government has imposed a slew of net-zero policies like so-called Clean Fuel Regulations and the Industrial Carbon Tax, while also standing in the way of desperately needed energy infrastructure projects. All of these contribute to making it significantly more expensive to produce and supply fuel.

Net-zero policies have also weakened the Canadian dollar. By discouraging investment and development in our oil and gas sector, these policies weaken one of the traditional pillars of the Canadian dollar: our resource exports. Since oil and other commodities are priced in US dollars, a weaker loonie means that fuel and virtually everything else we buy costs more.

Many of the reasons that prices are so high right now — the war in Iran, for instance — are beyond our control. But all of the time and effort the Liberal government has spent making it harder for us to supply the fuel that Canada, and the rest of the world, needs? That’s on them.

Unfortunately, nothing in the government’s approach suggests that real relief is coming anytime soon. Instead, we’ll get more window dressing, coupled with platitudes about standing strong from the “Elbows up!” crowd, while their policies continue to make our lives more expensive. On their watch, Canada has already gotten the dubious distinction of having the sixth highest food insecurity among all G20 nations.

Canadians deserve more than empty gestures. We need a government that will address the underlying issues inflating the cost of living in this country, rather than actively making them worse.

Dan McTeague is President of Canadians for Affordable Energy.