Federal government says affordability concerns will factor into decision as temporary fuel-tax relief nears its end

Ottawa has yet to decide whether it will extend its temporary fuel-tax holiday beyond September 7, as Canadians face the prospect of higher prices at the pump this fall.

Federal Secretary of State Wayne Long said the government is continuing to assess the measure as part of a broader review of affordability initiatives.

Prime Minister Mark Carney announced the temporary suspension earlier this year, removing 10 cents per litre from the federal tax on gasoline and four cents per litre from diesel. The relief began in April and is currently scheduled to end September 7.

With the deadline approaching, Long said Canadians have increasingly been raising the issue during federal pre-budget consultations.

“It’s something we’re going to certainly look at, but it’s a part of a bigger package for us,” the minister said during an interview in Regina, where he was participating in pre-budget meetings.

Fuel Prices Rose Following Middle East Supply Disruptions

The tax holiday was introduced as part of the federal government’s response to the Iran war, which disrupted petroleum supplies from the Middle East and contributed to a sharp increase in global oil prices.

Those higher crude prices quickly worked their way through to consumers.

Average Canadian gasoline prices increased by roughly 30 per cent between January and June, according to the latest monthly retail price figures available from Statistics Canada.

The combination of higher energy costs and broader household affordability pressures has prompted calls for Ottawa to either extend the tax holiday or eliminate the federal fuel tax altogether.

Ontario Premier Doug Ford has called for the tax to be permanently removed, while the Canadian Taxpayers Association has also urged the federal government to scrap it as an affordability measure.

A July Leger Marketing Inc. survey commissioned by the Canadian Taxpayers Association found approximately two-thirds of Canadians opposed a fuel tax.

Taxes Remain a Significant Part of Pump Prices

Fuel taxes already represent a substantial portion of what Canadian motorists pay at the pump.

According to the Canadian Taxpayers Association’s latest Gas Tax Honesty Report, approximately one-quarter of the price consumers currently pay for gasoline across Canada is attributable to taxes.

The organization projects that the tax and regulatory share of gasoline prices could rise further during the remainder of the decade.

Its analysis estimates that taxes and regulatory costs could account for more than one-third of the pump price by 2030.

That projection incorporates annual requirements under Canada’s Clean Fuel Regulations, which require reductions in the carbon intensity of transportation fuels. The calculation also assumes pre-tax gasoline prices remain comparable to levels recorded during the week of June 30 and that the federal 10-cent-per-litre fuel tax is reinstated.

Under the association’s scenario, filling a 64-litre tank with approximately $80 worth of gasoline in 2030 could carry an additional $26 in federal and provincial taxes and indirect costs associated with clean-fuel regulations.

The possibility of returning the federal fuel tax therefore comes at a politically sensitive time, particularly as affordability remains one of the most significant issues facing Canadian households.

Pre-Budget Consultations Could Shape Ottawa’s Decision

Long, whose responsibilities include the Canada Revenue Agency and financial institutions, is travelling across the country as part of the federal government’s consultations ahead of Budget 2026.

He said the concerns being raised during those meetings could influence decisions contained in the government’s fall budget.

Ottawa has already introduced several measures aimed at reducing household costs and inflationary pressures, including eliminating the consumer carbon tax, providing GST relief and offering a grocery and essentials benefit.

However, Long acknowledged that affordability continues to be a challenge for many Canadians.

“We know that families are struggling. We know that it’s incumbent on us to continue to deliver affordability measures to Canadians,” Long said.

Whether extending the gasoline and diesel tax holiday becomes one of those measures remains undecided.

With September 7 approaching, the federal government will soon have to determine whether motorists will once again pay the additional 10 cents per litre on gasoline and four cents per litre on diesel—or whether Ottawa will keep the temporary relief in place as part of a broader affordability package.

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