In less than 48 hours, the cost of gasoline in some areas of Canada will shoot up nearly ten percent. Motorists in Ontario will see prices jump 9c/L, the U.S. equivalent of prices rising 33-cents per gallon at midnight on July 1. Motorists in the U.S. should be on alert as politicians debate increasing taxes on gasoline as well.
The reason for the increase is that Ontario is the first to combine the GST (Goods & Services tax) and the PST (Provincial Sales tax). Currently, the two rates are 8% and 5%, respectively, and the PST had not been charged on gasoline purchases. That will change in Ontario, and gasoline will now be subject to the additional tax. The two taxes, PST and GST, will be combined to be called the HST, or the Harmonized Sales tax.
Come midnight July 1st, the average price of gasoline in Ontario, which currently stands at 96.6c/L, will rise closer to 105c/L, effectively ending 18 straight months with prices under the 105c/L mark. The last time prices averaged higher than 105c/L was October 9, 2008, just a few months after oil had hit a record near $150. Motorists will be hard pressed to see prices below 100c/L in the future after enjoying 346 days in the last year with average prices below 100c/L. Just 19 days in the last 365 days saw prices average over 100c/L in Ontario.
Canadians outside of these provinces may also see similar moves in the near future as more provinces seek additional taxes. While may Canadians will notice little additional tax, the additional tax on gasoline will be clearly visible as motorists drive by gasoline stations with big bright displays reflecting the additional pain at the pump.
Americans should also be concerned as politicians continue talking about increasing the federal taxes on each gallon. The federal tax on gasoline in the United States stands at 18.4 cents per gallon, and has not been increased since 1993. If converted to liters and Canadian Dollars, the tax would be roughly 5c/L.
Gasoline taxes in the United States pale to our Canadian neighbors. Taxes in Canada amount to over 50% of the cost of gasoline while in the United States, tax amounts to under 25% of the cost of gasoline.
We'll continue to monitor the situation, but if I was in Canada, it would be a good idea to make sure all your vehicles are filled up come Wednesday night. That is, of course, unless you don't mind paying the additional 9c/L (33-cents per gallon equivalent).