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Canada gas prices higher than U.S.’ because of higher taxes

March 9, 2011, 10:21 AM ET
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“Only $1.30 a gallon for gas? I couldn’t believe my eyes,” said the American tourist at Vancouver’s Granville Island Market the other day.

“Then I found out the truth… and I gagged!”

Think gas prices are high in the U.S. right now? Come to Canada, where prices may LOOK a lot cheaper on gas-station signs — 1.30 — but are in reality much higher, and have been for years.  Doing the math to convert prices is complicated.

The Toronto Globe and Mail reports that gas (occasionally called petrol here) recently hit 1.40 — gas is measured in litres in this metri-cized country — at a Vancouver station in suburban Richmond.  Get out your calculator and that comes out to about $5.60  a U.S. gallon. Not cheap.

Plus, the Canadian dollar (loonie) is at an eight-year high right now — it’s worth more than a U.S. dollar — so that makes Canadian gas even more expensive now.

So the years-old advice to Americans travelling to Canada still applies:  “Fill up your tank before you hit the border.” Canadian gas is still about $2 more per U.S. gallon than in the States.

That’s a big part of the reason you see smaller cars in Canada. And why many of the taxis in places like Vancouver are gas-sipping Priuses.

The high-gas-price paradox

So, why is gas so much more expensive in Canada, even though the country is sitting on the world’s second-largest oil reserves?

Mostly, because Canadians pay far more federal and provincial taxes at the pump.  And not just for national health care, which seems (to me, anyway) a pretty good use of tax money.

Canadians pay about 33% in combined taxes on average on the price of fuel, and Americans pay about 11%,  Canadian gas guru Preet Banarjee reported a while back. But that Canadian figure looks low (see below).

Libya jitters and the rising international cost per barrel of oil is part of the highest Canadian pump prices in three years, of course. Canada is not immune to that.  But Canadians are used to paying higher taxes for just about everything than Americans.  And it does get a lot of big trucks and SUV’s off Canadian roads, which makes driving easier in Canadian cities, I can tell you from personal experience.

A bit of history: High Canadian gas prices stayed that way even when the government took over part of the oil industry and founded Petro-Canada in the 1970′s. The government-run oil company slowly privatized and finally merged with Suncor in 2009, and Suncor now owns 60 percent of the oil company. But Petro-Canada stores and mini-marts still are part of the Canadian landscape.

Some of the most expensive gas in Canada tends to be in the west — where much of its oil is buried in the ground. The Vancouver Province reports that according to MJ Ervin & Associates’ most recent weekly survey of fuel prices in Canada, regular gas was averaging 127.6 cents a litre in Vancouver last week, the fifth-highest price in Canada after Labrador City (130.9), Timmins (128.9), Yellowknife (128.4) and Montreal (127.8).

Interestingly, though, the data shows Vancouver’s high prices are due almost exclusively to the high gas taxes in this city, including the 15 cents a litre which goes to TransLink. That’s Vancouver’s superb mass-transit system, which which vastly expanded for last year’s Olympics out to the city’s airport.

A separate ranking of gas prices before taxes reported in The Province puts Vancouver’s price at just 83.5 cents a litre, just a hair above the Canadian average of 83.1 and well behind cities like Saskatoon (89.2), Winnipeg (87.1) and Calgary (84.7).  That means that about 40 percent of what Canadian motorists pay at the pump goes to taxes.




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About Bill Mann's Canada

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  • Bill Mann tracks Canadian business news and trends, viewing them through the perspective of having lived and worked as a journalist in Canada and the United States.

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