TVO’s David Rockne Corrigan interviews En-Pro’s Roger McKnight on Ontario premiere, Doug Ford’s involvement in lowering gas prices

Doug Ford really has cut gas prices. Will he be able to cut them further?

Published on Nov 15, 2018 by David Rockne Corrigan
a person putting gas in their car

When the NDP grilled Doug Ford Monday morning at Queen’s Park about the recent cabinet shuffle, the premier tried to steer the conversation toward a topic that he says is more important to Ontarians: saving money.

“We’re making sure we’re lowering taxes. We’re lowering gas prices — which everyone talked about this week — about how low the gas prices were,” he said.

While there’s a good chance that not everyone in Ontario is talking about lower gas prices, the Progressive Conservatives certainly are. Ford, who earlier this year campaigned on a promise to cut gas prices by 10 cents a litre, is now taking credit for savings at the pump.

According to GasBuddy, which tracks fuel prices at stations across the province, the average price per litre of regular gasoline in Ontario is currently about $1.10 (compare that to the 2018 high of $1.33 in May).

Gas prices are affected by a number of factors, including the global supply of and demand for oil. So can the Tories reasonably take credit for some of the reduction?

In a word, yes. In four words: scrapping cap and trade.

Ford’s claims that his government’s policies have resulted in a four-to-five-cent decrease in pump prices are credible, says Jean-Thomas Bernard, an energy economist and visiting professor at the University of Ottawa who watches the fuel market.

Before last June’s election, Ontario refineries had been required to pay roughly $20 per tonne for carbon permits — and they passed the cost on to consumers. Not anymore.

“In terms of litres of gasoline,” Bernard says, cap and trade “represented about four cents. So by getting out of it, he can say the price now is lower by about four cents.”

Although the PC government didn’t pass legislation until the end of October, the cap-and-trade program had effectively been cancelled right after the June election: from that point on, the government no longer held carbon-permit auctions.

“On or about September 8, the wholesale prices indicated that cap and trade had been eliminated completely at about 4.2 cents a litre. So if he’s claiming credit, well, the prices actually did fall by that amount,” says Roger McKnight, chief petroleum analyst for En-Pro International, an energy consulting firm based in Oshawa.

By October, Ford had begun to link the lower prices to the cap-and-trade cancellation.

“Scrapping the cap-and-trade carbon tax was our first action when we took government, and today, gas prices are almost five cents a litre cheaper as a result,” Ford told an audience last month at the Ontario Economic Summit, in Niagara-on-the-Lake.

“My friends, we still have another five cents more to go on that,” he added.

But that five cents will likely prove trickier, says McKnight.

During the election campaign, Ford signalled that his government would consider reducing the provincial fuel tax — currently 14.3 cents per litre for diesel, 14.7 cents per litre for regular gas — which funds transportation infrastructure at the municipal and provincial levels.

“To get to 10 cents, Ford will have to take his own provincial road tax and knock that by close to five cents a litre,” McKnight says. “And if he does that, he’s going to have to make it up somewhere, because that’s a pretty hefty whack on the provincial coffers.” (TVO.org asked the Ministry of Energy, Northern Development and Mines whether the government would consider such a move, but the ministry provided no response.)

Another potential roadblock: Ottawa. Justin Trudeau’s Liberals have indicated that they will impose carbon-pricing plans in provinces, such as Ontario, that lack them. In response, the Ontario government has launched a constitutional challenge.

Not everyone agrees that lower gas prices should be the government’s focus. “Part of the policy motivation here is, understandably, the desire to make transportation more affordable for Ontarians,” says Lindsay Wiginton, transportation director at the Pembina Institute, an energy and climate think-tank. “Our view is that if that’s what they’re interested in doing, they should be offering more transportation options. They should be investing in transit.”