Introduction
Gas prices in Ontario have been a source of frustration for drivers across the province. With prices that seem to fluctuate every week, many are left wondering why they are paying so much at the pump. While a variety of factors come into play when it comes to gas prices, including global and national events, there are specific reasons why Ontario has some of the highest gas prices in Canada.
In this article, we will explore the various factors that contribute to high gas prices in Ontario and provide a deeper understanding of what drivers can expect in the coming years.
Why Are Gas Prices So High in Ontario?
Gas prices in Ontario are high due to various reasons. One of the biggest reasons is the increase in the price of oil, which is the main determining factor in the price of retail gasoline. During the early months of the COVID-19 pandemic, oil prices took a significant hit as travel restrictions were imposed, but since then, they have steadily increased.
Additionally, the Ontario Energy Board announced in June 2021 that Enbridge would be allowed to increase natural gas prices by 20%, which was partly due to the debt Enbridge was asked to cover.
According to Dan McTeague, president of Canadians for Affordable Energy, gas prices in Ontario were expected to go up by 11 cents per liter over two days in April 2022.
Finally, the world economy is just now recovering from two years of disruption, and this has contributed to the continued high gas prices in the Toronto area and beyond.
The Lasting Effects of the Pandemic
The COVID-19 pandemic has had a significant impact on the global economy, including the oil and gas industry. In Ontario, the pandemic has contributed to high gas prices in several ways.
Here are some of the lasting effects of the pandemic that have led to high gas prices in Ontario:
- Reduced production: The pandemic led to a significant decrease in global demand for oil and gas, which caused many producers to reduce their output. The reduction in production has resulted in less supply, which has contributed to higher prices.
- Supply chain disruptions: The pandemic has caused disruptions in supply chains, which has made it difficult for some gas stations to get the fuel they need. This has led to shortages in some areas, which has also contributed to higher prices.
- Increased costs: To comply with COVID-19 safety regulations, many businesses have had to implement new procedures and invest in new equipment. These costs have been passed on to consumers in the form of higher prices, including gas prices.
- Recovery efforts: As the economy continues to recover from the pandemic, there is increased demand for oil and gas. However, the recovery efforts have been slow due to ongoing restrictions and reduced travel. This has resulted in a gradual increase in gas prices.
Overall, the COVID-19 pandemic has had a significant impact on the oil and gas industry and has contributed to the high gas prices in Ontario. While there are various factors at play, the lasting effects of the pandemic continue to affect the supply and demand of gas, ultimately leading to higher prices.
Increased Taxes and Regulations
In Ontario, gas prices have been on the rise and there have been attempts to address this issue through increased taxes and regulations. One of the measures taken is the March 2023 carbon tax increase, which will add an extra 2.2 cents to the cost of a liter of gas, with the carbon tax accounting for 11 cents of the liter.
However, there has also been relief in the form of tax cuts, such as the Ontario government’s reduction of the provincial gas tax by 5.7 cents per liter in 2022. Despite this relief, gas prices are still expected to rise by 5 cents per liter, according to Chief Petroleum Analyst Roger McKnight.
In addition to taxes, the New Democratic Party in Ontario is urging regulations on the cost of petroleum to address the soaring gas prices in the region. It is also worth noting that Enbridge gas bills have more than doubled in price for GTA customers in the past two years, from 10 cents per cubic meter to 23 cents per cubic meter, despite a mild winter.
Fluctuating Crude Oil Prices
One of the main factors that contribute to high gas prices in Ontario is fluctuating crude oil prices. The price of crude oil is determined by global supply and demand, which can be affected by various factors, such as geopolitical tensions, natural disasters, and changes in oil production by major oil-producing countries. When the price of crude oil rises, it leads to higher gas prices in Ontario and other parts of the world.
In recent years, crude oil prices have been volatile due to several factors, including tensions in the Middle East, production cuts by major oil-producing countries like Saudi Arabia, and the impact of the COVID-19 pandemic on global demand 1. As a result, gas prices in Ontario have been on the rise, and consumers have had to pay more at the pump.
It is worth noting that the price of crude oil is just one of several factors that contribute to the cost of gas in Ontario. Other factors, such as taxes, transportation costs, and refining costs, also play a role in determining the final price. However, fluctuations in crude oil prices can have a significant impact on gas prices, and consumers in Ontario should be aware of this when planning their budgets.
Market Competition and Refinery Shutdowns
High gas prices in Ontario can be attributed in part to market competition and refinery shutdowns. Refinery shutdowns have reduced the supply of gasoline, leading to higher prices for consumers. Some refineries shut down as the demand for petrol fell off during the pandemic-induced recession in 2020, and not all of those refineries have since reopened.
The fewer refineries in operation in 2021 than in 2019, further exacerbate the shortage of refining capacity in the country. Furthermore, the shutdown of a BP-owned refinery near Toledo, Ohio, in September 2022, which may not reopen until early 2023, has also contributed to rising gas prices in Ontario.
Transportation and Distribution Costs
Transportation and distribution costs are high in Ontario because of the distance between refineries and consumers. This makes transporting crude oil from Alberta or Saskatchewan more expensive than it would be if crude oil could be transported by pipeline. The cost of transporting crude oil is also higher than it was just a few years ago when there were fewer pipelines for transport. Transportation costs have increased faster than distribution costs over time—and this trend has continued since 2010!
Distribution costs are high because most gas stations charge their customers every time they fill up their tanks (even if only half a tank’s worth), so they need to buy lots of bottles and cans that can hold up under repeated use while they’re being filled with fuel by customers who might not return soon after purchasing one bottle or can at most stores within driving distance.
Currency Exchange Rates and International Politics
Since the early 1990s, the exchange rate between the Canadian and American currencies has been comparatively constant, notwithstanding some minor fluctuations. The rise in gas prices is a result of this exchange rate not reflecting what you would expect: that is, it’s not just Canada’s high taxes on gasoline that are responsible for this increase; it’s also because many other countries have imposed similar taxes on their citizens during this period, which means that they’re now buying more Canadian oil than they otherwise would have done.
This situation could get worse if there were another global currency war—in which multiple countries try to prop up their currencies by printing more money (or raising interest rates) than others do—and if all these nations attempted this tactic at once, too! That could seriously damage our economy and cause lots of hardship for us here at home despite any benefit we might gain from higher oil prices abroad–and even if nothing else happens between now and 2020 when Canada elects its next government?
Conclusion
There are several factors contributing to the high gas prices in Ontario. According to experts, the Ukraine-Russia border crisis, along with other geopolitical tensions, has resulted in a global increase in oil prices, which has in turn raised gas prices in Ontario and across Canada. Additionally, the ongoing COVID-19 pandemic stage 3 in Ontario has also led to supply chain issues and a shortage of drivers, which has caused delays in delivering fuel to gas stations, further raising prices.
Finally, some have pointed to high taxes on gas in Ontario as contributing to the high prices. However, a recent proposal by the Ontario government to temporarily lower the provincial gas tax and fuel tax may provide some relief.
FAQs on why are gas prices so high in Ontario
1. Will gas prices stay high in Ontario?
While prices have already decreased as the year draws to a close, providing much-needed relief to drivers during the holidays, one industry analyst predicts that the price of petrol will increase once more in 2023. In 2022, prices at Ontario’s petrol stations reached record highs.
2. Will gas prices drop in Ontario?
While prices have already decreased as the year draws to a close, providing much-needed relief to drivers during the holidays, one industry analyst predicts that the cost of petrol will increase once more in 2023. In 2022, prices at Ontario’s petrol stations reached record highs.
4. Who controls the price of gas in Ontario?
The constitution of Canada gives the government the power to control petrol prices, but only in dire circumstances. Canada and the Atlantic provinces are two examples of provinces and territories that do this.
