It's not an April Fool's joke -- Ontario residents are in for a spike in gas prices on Monday when the federal carbon tax takes effect.
The new carbon charge applies to all fossil fuels sold in Ontario.
The federal government was pushing provinces to impose a price on carbon emissions, but because Ontario, and three other provinces, failed to introduce a plan to fight climate-changing emissions, the government implemented the carbon tax.
According to Dan McTeague, a senior petroleum analyst at GasBuddy.com, drivers in Southwestern Ontario could see a spike of about five to 10 cents per litre on Monday.
"Drivers got a little bit of a break last September when the Ontario Government scrapped the cap and trade carbon tax. They saved in net, five cents a litre. The federal government was not happy about that, so they have introduced legislation and are imposing those provinces that said no to a province tax; Ontario, New Brunswick, Saskatchewan and Manitoba. A net five cent a litre increase," explained McTeague. "That means that refineries have been told that they have to pay this out. They're passing that on to gas stations who will have to pass it on to consumers."
The government of Canada said that most of the money collected through the tax will go back to Ontarians by providing support to the province's schools, hospitals, small businesses, municipalities, and Indigenous communities. Households will also be given a climate change initiative tax rebate, averaging around $307 for a family of four.
The actual carbon tax increase is 4.42 cents per litre, but McTeague said you also have to factor in HST and retail margin to the price.
McTeague added that drivers are in for some more bad news in the next few weeks. It is mandatory that more expensive to produce "summer gas" be installed in consumer pumps by April 15. He said this will cause prices to rise another five to 10 cents per litre.
"Two shoes to drop and along with a retail margin, say goodbye to under a dollar ten, a dollar 15 a litre anywhere," he said.
Gas prices last hit record highs when oil was trading for $100 a barrel. McTeague said currently, oil is sitting at around $60 a barrel and besides the new carbon tax, there are other factors at play for the high prices.
"2019 is on track to being one of the most expensive years at the pumps," he said. "There's a tightness in global oil supplies. U.S. demand is very high. Of course, with new taxes being introduced and levied, it just makes a bad situation worse. So, look for a very expensive summer ahead in which gas prices could, at points here in Ontario, reach $1.40 a litre."
According to McTeague, it is hard to predict the trend of gas prices in the next few years, but said despite the increase in electric vehicles and the popularity of renewable energy, demand for oil will not slow down any time soon.
The new tax will also pinch the wallets of homeowners. The federal carbon charge for natural gas will be 3.91 cents per cubic meter, increasing annually each April. Enbridge Gas said the federal carbon charge will add about $94 to an annual natural gas bill.
Although costs will be going up, McTeague said there are a few tricks for drivers wanting to save a few cents. He said the best time to buy fuel is in the evenings and suggests that prices are usually better Wednesday, Thursday and Fridays as retailers shed their retail margins.
