Alberta Boasts of Benefits of Fuel Tax Relief

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Written by Daniel Graeber for Industrial Info Resources (Sugar Land, Texas)----The provincial government of Alberta called on federal authorities to extend tax relief for retail gasoline, saying its constituents have already seen millions of dollars in savings at a time when inflationary pressures are tight.

The government in Alberta offered a 13-cent-per-liter tax break on retail fuels beginning April 1. Like other economies, consumers there are struggling with high inflation and high commodity prices.

Over the first six months of the year, Albertans have saved around US$460 million in the form of tax relief and could save another $145 million over the next three months, its government said. The government estimates the program will yield savings so long as West Texas Intermediate (WTI), the U.S. benchmark for the price of oil, stays above $80 per barrel.

WTI was actually trading at close to $78 per barrel early Monday morning, though a rebound is expected due to the arrival of Hurricane Ian in the U.S. territorial waters of the Gulf of Mexico.

Regardless, the tax relief program may be dampening inflation in Alberta. In the United States, where inflation is running at around 8.3%, energy prices account for a good deal of the increase in consumer prices. Over the 12-month period ending in August, gasoline prices alone are a good 25% higher than this time last year.

For Alberta, inflation was running closer to 6% over the 12-month period ending in August. That's among the lowest levels for all provincial economies and compares with a national level of 7% for the year. And trends are moving lower too -- month-on-month inflation for June was 1.4%; it hit zero in July, and was at a negative 1.3% for August.

Canada in general has higher gasoline prices than the United States. It posted a national average retail price at the loose equivalent of US$5.35 per gallon, compared with a national U.S. average of $3.72 per gallon for Monday. Even with the higher prices, however, the program is yielding results.

When it was first offered in April, a study from the University of Calgary found the tax relief would generally be beneficial.

"The fuel tax holiday is one of several policy options for supporting families strained by rising energy prices," the report read.

Alberta sits on some of the largest oil deposits in the world, but the global nature of the commodities trade means it's beholden to geopolitical events outside its border. Nevertheless, the provincial government has said that not only does it hold the cards for regional energy security, but its tax programs should be seen as an example of sound policies for the domestic market as well.

"We have already committed more than C$2 billion (US$1.47 billion) in relief with targeted measures that help fight inflation," provincial Finance Minister Jason Nixon said. "We strongly encourage the federal government to follow our lead and reduce the federal fuel tax and carbon tax to provide more relief to Canadians."

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