Prime Minister Mark Carney probably didn’t think that after suspending the federal excise tax on gasoline, diesel and jet fuel about a month into the start of the United States-Iran war , they would still be at loggerheads six months later and prices at the pumps would still be high.

But the Sept. 8 deadline for the tax, which adds 10 cents to the price of a litre of gasoline and four cents to a litre of diesel, to restart is in sight and pressure is mounting on Carney to either completely rescind the tax or extend the suspension into the new year.

Ontario Premier Doug Ford has called on the prime minister to, if not permanently axe the tax, then at the very least suspend reintroducing it until 2027.

“The suspension, which is due to expire after Sept. 7, brought much-needed relief to people struggling with the rising cost of living and ongoing economic uncertainty caused by U.S. tariffs,” he said in a letter on Aug. 7.

The national average price for a litre of gas including taxes rose to a high in mid-May of $1.98 a litre. Since then, it has come down to $1.70. Excluding taxes, which can vary from province to province, the average price sat at $1.39 per litre on Aug. 11, down from a high of $1.65, according to Kalibrate Technologies Ltd.

Ford isn’t the only one calling for Ottawa to rethink reinstating the excise tax.

A poll released by the Canadian Taxpayers Federation (CTF) last week said 63 per cent of people oppose the tax being added back to prices at the pump.

“Carney needs to permanently cut the gas tax because Canadians can’t afford to pay more to fuel up their vehicles and also pay higher prices for everything that is trucked to store shelves,” Franco Terrazzano, CTF federal director, said. “Carney needs to listen to Canadians and confirm that he will not be hiking gas taxes in September.”

But not everyone is onboard with the idea.

“It’s sensible to let this ride out and not renew it,” Ali Jaffery, chief economist at KPMG Economics, said.

He said “the worst is behind us” in terms of the increase in energy prices and the Canadian economy is in better shape than back in April when the suspension came into effect.

“Material slack” in the economy — meaning it produces less than it is able to — has since tightened, he said, and the inflation shock has also not been as great as feared.

Canada’s headline inflation rate currently stands at 2.8 per cent, which is near the top end of the Bank of Canada target range of one per cent to three per cent. But core measures of the consumer price index that policymakers follow have been slowly cooling.

Douglas Porter, chief economist at Bank of Montreal, is of two minds on the fuel tax.

“It’s not a no-brainer to extend it,” he said, adding that the tax suspension cost Ottawa more than $2 billion in revenue — not a “trivial” amount — with a full-year holiday costing more than $6 billion.

“I could see the argument for a temporary extension, while we’ve still got uncertainty around the Strait of Hormuz and relatively high fuel prices,” he said. “If I were Ottawa, I would be cautious about making it permanent.”

Porter is also worried that overall inflation is too high and said anything that can cool inflation expectations at a critical juncture for the economy is a good idea.

Of course, adding 10 cents back on a litre of gas means 10 cents that won’t be in Canadians’ pockets.

“It hurts, no doubt about it. It just maybe hurts less than what we might have expected,” Jaffery said.

He thinks a reviving job market will help people to reabsorb the hit from higher prices.

Statistics Canada on Friday said the economy generated 75,000 net new positions. Average hourly wages are also rising, though the increases have been slowing. For example, in July they rose three per cent, down from 3.7 per cent in June.

“With the direction that we’re headed, (people) will be able to absorb this,” Jaffery said. “But, yes, no doubt about it, the average household is not going to be happy, nor should they be, about higher prices at the pump.”

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Trips into Canada were up 6.3 per cent in July, boosted by three FIFA World Cup matches held in Canadian host cities Vancouver and Toronto during the month.

Statistics Canada said 863,600 overseas residents arrived in the country, many to support their home teams from Colombia, Switzerland, Portugal and Croatia.

Total air arrivals from those countries were up 18.7 per cent or 6,700 in July compared with a year ago. — Denise Paglinawan, Financial Post

Read the full story here.
  • Today’s Data: Canada building permits for June, U.S. inflation for July, mortgage applications, real average weekly earnings, federal budget balance
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Canada’s consumers are in trouble. That’s the assessment of economist David Rosenberg, president of Rosenberg Research & Associates, after new data showed that the number of consumers filing for insolvency rose seven per cent in the second quarter from a year ago, while the number of people filing for bankruptcy in the first and second quarters topped 2009 levels. Keep reading here to find out what Rosenberg thinks the Bank of Canada should do with interest rates.

Interested in energy? The subscriber-only FP West: Energy Insider newsletter brings you exclusive reporting and in-depth analysis on one of the country’s most important sectors. Sign up here.

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McLister on mortgages

Want to learn more about mortgages? Mortgage strategist Robert McLister’s Financial Post column can help navigate the complex sector, from the latest trends to financing opportunities you won’t want to miss. Plus check his mortgage rate page for Canada’s lowest national mortgage rates, updated daily.

Financial Post on YouTube

Visit the Financial Post’s YouTube channel for interviews with Canada’s leading experts in business, economics, housing, the energy sector and more.

Today’s Posthaste was written by Gigi Suhanic with additional reporting from Financial Post staff and Bloomberg.

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