Why a tax break on gas won't help you much now

In the last week the price of gas has not only reached a record high, it has gone up at a record pace.

The price increases follow uncertainty in world petroleum markets following the invasion of Ukraine by Russia. Russia is one of the largest producers of oil in the world.

On Monday the minimum price for a litre of regular, self-serve gasoline with the second unscheduled price review in a week hit $1.865. The 12.6-cent jump in the price at the pump leaped over the previous inflation-included record set in July 2008, which was $1.81 in 2022 dollars.

In total the price of gas rose 29.7 cents in four days, which made it a record not only for highest price but also for fastest increase.

With prices that high, and inflation already running hot, Islanders might be thinking this would be a good time for the government to offer a tax break to bring down the cost. Unfortunately, that won't save as much as you might think.

Most of the government levies on the price of gas are fixed, that is, they do not increase with the price.

Back in the strange days of 2020, when the price of gas bottomed out at 73 cents a litre in July, government levies did make up a significant amount of the price. Government levies federal excise, provincial tax and the carbon levy made up 25.1 cents, more than a third of the cost. The HST added another 9.5 cents.

Now, with gas more than triple that cost, those first three levies remain the same, 25.1 cents. HST is connected to the price. It is up to 24.3 cents.

The big change is in the base dealer price, made up of a five-cent margin for the wholesaler (which also doesn't change with the price) and the benchmark price, which is set by world markets, outside of the control of not only the provincial but also the federal government.

Removing the government levies outside the HST would not even equal the cost of the price increase in the last week.

It is also worth noting that retailers are not seeing any benefit from the price increase. Their profit margin also remains the same, at six cents per litre.