Canada Gas Prices Update: Canadian drivers could face another increase at the pump in September, and the reason goes beyond the usual movement in oil prices.
A temporary federal pause on the fuel excise tax is scheduled to end on September 7. Unless the government extends the measure, the tax will return to its full rate on September 8, bringing back a charge that has been removed from gasoline since April.
The change could be noticeable almost immediately. The federal excise tax on gasoline was reduced from 10 cents per litre to zero when the pause took effect on April 20. The excise tax on diesel, normally four cents per litre, was also temporarily eliminated.
But September may bring another complication. Around the same period, some Canadian gas stations begin moving back to winter-grade gasoline, creating the possibility that the return of the federal tax could overlap with another source of pressure on pump prices.
Why is gas expected to become more expensive?
The clearest reason is the scheduled return of the federal excise tax.
Dan McTeague, president of Canadians for Affordable Energy, said the reinstated tax could add roughly 10 to 11 cents per litre to gasoline prices, depending on the region.
For someone filling a 50-litre tank, that would translate into several additional dollars at the pump. The size of the increase will not necessarily be identical across Canada, but the tax change itself provides a clear reason drivers may see higher prices after September 7.
The Canadian Taxpayers Federation estimates that under the current tax pause, a sedan driver saves around $6 on a fill-up. The estimated saving is about $7 for a minivan driver and roughly $10 for someone filling a pickup truck. Those savings are at risk of disappearing when the tax returns.
Canada Gas Prices: What changed earlier this year?
Prime Minister Mark Carney announced the temporary pause on April 14 after fuel prices had risen sharply amid the war with Iran.
The measure took effect on April 20 and was estimated to provide more than $2.4 billion in tax relief during the year.
For gasoline, the move effectively removed a federal tax that has been set at 10 cents per litre since 1995. The diesel excise tax, which has stood at four cents per litre since 1987, was also reduced to zero for the duration of the pause.
That relief, however, was temporary from the beginning. With September 7 approaching, the question for motorists is whether Ottawa will allow the measure to expire as planned or announce an extension.
So far, there has been no indication cited that the federal government will continue the tax break beyond September 7.
Why the timing matters?
The scheduled tax increase is arriving during an already difficult period for Canadian fuel prices.
McTeague has pointed to the seasonal switch back to winter-grade gasoline at some stations as another factor that could affect prices around the same time.
That means September could bring two separate pressures at once: the reinstatement of the federal excise tax and a seasonal change in the gasoline market.
There is also a broader uncertainty hanging over fuel prices. Continued disruption to oil supplies connected to the conflict with Iran, particularly if combined with stronger demand, could push oil and gasoline prices higher still. The extent of any increase remains uncertain.
Canadians are already paying much more for gasoline
The possible September increase comes after fuel prices have already climbed sharply this year.
GasBuddy data cited in the report showed that Canada’s average gasoline price reached 191.1 cents per litre in May, the highest average recorded during the year at that point.
For comparison, the country’s highest national average on record was 210.8 cents per litre in June 2022.
Gasoline has also become an important part of Canada’s inflation picture.
Statistics Canada said gasoline was the largest contributor to the annual increase in the Consumer Price Index in July. Gasoline prices were 25.7 per cent higher than a year earlier, compared with a 20.5 per cent annual increase in June.
The agency attributed continued upward pressure on gasoline prices to supply uncertainty linked to the conflict in the Middle East, specifically the closure of the Strait of Hormuz. It said consumers were paying the highest gasoline prices since June 2022.
So, how much could Canadians end up paying?
There is no single confirmed national price for what gasoline will cost after September 8.
What can be identified more clearly is the additional tax burden. McTeague estimates the return of the excise tax could add about 10 to 11 cents per litre, depending on where drivers live.
The eventual pump price will still depend on other factors affecting gasoline markets, including regional conditions, seasonal fuel changes and developments affecting global oil supply.
For Canadian drivers, September 8 is therefore an important date. Unless the federal government extends the current tax pause, a cost that has been absent since April will return just as other pressures could also be affecting gasoline prices.
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