Gasoline Prices

Overview

So what’s up with the price of gasoline? That’s always a hot topic, but contrary to popular belief, gasoline is one of the most competitively and transparently priced consumer products.

So how is gasoline priced? There are four factors:

1

Crude oil prices

As a commodity that trades in world markets, crude oil prices fluctuate according to supply and demand. Global economic conditions, geopolitical or military events and other factors can all affect the price.


2

Wholesale prices

The wholesale price of refined gasoline is also a factor of supply and demand. World events such as refinery incidents, extreme weather, or changes in demand play a role in determining the wholesale or commodity price.


3

Retail mark-up

Most retailers are independent business owners, so they are able to competitively set their own margins, but the retail price still tends to fluctuate along with wholesale prices. As margins on fuel are typically very low, retailers often add services such as a car wash or convenience store to help them meet their overheads.


4

Taxes

Taxes include both federal and provincial taxes. In some municipalities, an additional local tax also applies. Gas prices tend to be lower in the U.S. primarily due to lower fuel taxation.

Fuel Prices in Canada: Frequently Asked Questions

Oil markets are global. Crude oil and refined products are traded internationally. As a result, there is no such thing as a purely “made-in-Canada” fuel price. Canadian prices generally move with global market conditions.

Below are answers to common questions about what influences fuel prices in Canada.

Energy markets react quickly because they are global and traded in real time. Oil and refined fuels are bought and sold continuously on international markets and are the most important commodities in the world in terms of economic impact and total market value. As a result, oil markets are monitored and traded 24 hours a day, seven days a week across major global trading hubs. When major geopolitical events, supply disruptions, or economic developments occur, traders and buyers adjust their expectations immediately. These changes are reflected quickly in global prices, which in turn influence fuel prices in Canada. As often expressed by economists, prices are always an outcome of the supply- demand balance.

Retail fuel prices generally reflect current market replacement costs. A common misconception is that the fuel in a station’s tanks was purchased weeks earlier and should therefore be sold at older prices. In practice, however, retail prices are typically based on the current cost of replacing that fuel, which changes alongside daily wholesale market prices.

As a result, fuel prices can move quickly in either direction. Changes in crude oil prices, refinery operations, regional supply levels, and consumer demand can all influence wholesale markets on a daily basis, causing retail prices to rise or fall accordingly.

Global events can have a significant impact on Canadian fuel prices because oil markets are highly interconnected. Even when conflicts or supply disruptions occur far from Canada, they can quickly influence global crude oil prices and fuel markets worldwide.

For example, geopolitical tensions in the Middle East often affect market expectations about future oil supply. Although most Middle Eastern crude oil is exported to Asia, concerns about potential disruptions can still increase global oil prices, which in turn can affect fuel prices in Canada.

Other global factors — including natural disasters, refinery outages, sanctions, shipping disruptions, and broader economic conditions — can also influence the supply and demand balance, contributing to price fluctuations at the pump.

The key components that determine the overall price that is shown at the pump include: crude costs, refining margin, retail margin, taxes, and environmental charges.

There are several key reasons why gas prices vary between cities and provinces. The main factors include taxes, local competition, fuel storage and sales capacity, transportation costs, and the operating expenses of individual gas stations.

One of the biggest differences comes from taxes as taxation regimes vary considerably between provinces. Gasoline prices include both fixed taxes and sales taxes. Fixed taxes are charged at a set rate (cents per litre), such as the federal fuel excise tax, while general sales taxes are percentages that vary depending on the price of fuel and the province or municipality where it is sold. As a result, drivers in different regions can pay noticeably different prices at the pump.

Local competition also plays a role, especially between stations located close to one another. If one station lowers its price to attract customers, nearby competitors often respond by lowering their prices as well. This can continue until profit margins become too small, at which point prices may begin to rise again.

Service station efficiency can also impact prices. Stations that generate revenue through services such as car washes, convenience stores, or fast-food outlets may rely less heavily on fuel sales alone, which can help reduce pressure on gasoline prices. Transportation costs also matter: stations located farther from fuel terminals or suppliers generally face higher delivery costs, which can be reflected in the price consumers pay at the pump.

Fuel taxes and environmental levies can account for over half of the price at the pump. Depending on the province and region, there can be up to five different taxes and levies at the pump. These include federal (GST) and provincial (PST) taxes, provincial fuel taxes, environmental levies and municipal transit charges. The Canadian Fuels Association is neutral on the issue of taxation but supports full transparency in pump pricing and believes consumers should be aware of the full role that all forms of taxes play in the price they pay for fuel. Overall, taxes are a government and societal decision; the industry simply collects and remits them.

In the four Atlantic provinces, prices are regulated and adjusted by a public utility Board while all other Canadian provinces are operating as a free market. As regulated prices are usually adjusted only once a week, regulated prices do reduce volatility of daily fluctuations; however, government interventions with mechanisms to track global and regional fluctuations also introduce inefficiencies as regulators try to mimic market dynamics. These inefficiencies will usually lead to higher average prices for consumers over a long period of time. This results in a trade-off between the benefit of less volatility at the expense of higher average prices. This explains why price regulations are not in place elsewhere in Canada or in any other western hemisphere countries.

Since fuel taxes account for an important portion of pump prices, a reduction, removal or suspension, of fuel taxes can result in lower gas prices.

Two recent examples of noteworthy reductions can easily be analyzed to confirm that these reductions have benefited consumers. Publicly available data (i.e. Kalibrate) have confirmed that the Prime Minister of Canada’s decision to remove the carbon tax of 18 cents per litre (March 2025) and excise tax of 10 cents per litre (April 2026) have completely benefited consumers with equivalent reductions at the pump.

Short-term fuel price predictions are often unreliable because gasoline prices are influenced by many constantly changing factors, including global crude oil markets, refinery operations, seasonal demand, weather events, and geopolitical developments. As a result, forecasts about pump prices weeks or months in advance are rarely precise.

One predictable seasonal pattern, however, is the increase in gasoline prices that typically occurs in mid- April, followed by a decrease around mid-September. This is tied to the transition between winter and summer gasoline blends.

In mid-April, fuel suppliers are required to switch to summer gasoline blends, which are formulated to reduce evaporation and smog during warmer weather. Winter blends contain more butane, a lower-cost component that helps vehicles start in cold temperatures. Because butane evaporates more easily and contributes to air pollution in warmer conditions, it is reduced or removed from summer blends. Producing summer gasoline is more expensive, which can contribute to higher pump prices.

In mid-September, suppliers transition back to winter blends, which are less costly to produce. This seasonal change often contributes to lower gasoline prices heading into the fall and winter months.

No, this is not true. The question has been analyzed several times over the years including by the Conference Board of Canada. Their conclusion was clear; days preceding long weekends have shown that prices can decease, increase or remain the same with no correlation whatsoever. While gasoline demand may increase ahead of a long weekend due to higher travel activity, fuel prices must remain competitive within the local market. In many cases, there is little to no noticeable difference between gas prices on a regular weekend and those on a long weekend.

Price increases that do occur during summer long weekends are often tied more closely to broader seasonal factors, such as higher overall demand and the cost of summer gasoline blends, rather than the holiday weekend itself.

The notion of strategic reserves in OECD countries was predicated on the need to protect countries vulnerable or relying on imports for their energy needs. This is clearly not the Canadian situation. Canada is an exporting country relying on strong domestic reserves and production and part of an integrated North American market. Unlike some countries, Canada has significant oil production and refining capacity and is closely integrated with the United States through pipelines, refineries, and fuel distribution networks. This integration provides access to a large and reliable supply system across North America. Strategic petroleum reserves are typically used by countries that rely heavily on imports and have limited domestic supply. In Canada’s case, market access, domestic production, and integrated infrastructure have historically served a similar role in maintaining supply security. In addition, establishing and maintaining a strategic petroleum reserve is a costly undertaking. Ultimately, the costs of building, maintaining, and managing such a reserve would be borne by the Canadian economy and consumers.

Crude oil prices fluctuate according to supply and demand

Crude oil is a commodity that trades in world markets. The market price of crude oil at any time is a function of commodity traders’ assessments of supply and demand conditions, both current and future. These assessments take into account a variety of scenarios that can affect supply and demand such as economic conditions, natural disasters and geopolitical or military events, especially in major oil-producing regions.

Taxes by Jurisdiction

Canadian gas taxes are more than twice as high as those in the US. Outside of taxes, historical price data shows that the price of gasoline in Canada is very similar to the US. Canadian gas taxes not only vary from one province to another, but also from one region to another. Outside taxes, gasoline prices are similar across Canada.

Canada/U.S. Price Component Comparison

The main reason gas has cost less in the United States when compared to Canada is because gasoline is taxed at a lower rate in the United States. Outside of taxes, the average price of a litre of gasoline in Canada is quite similar to the price in the United States.

International Comparisons

Historical data shows that Canadians pay less for gasoline than consumers in most countries. The chart below compares the prices in eight countries and shows the effect of taxes on pump prices.

Regulated Markets

Some provinces regulate the price of gas to prevent below-cost selling, to protect their dealer margins and to ensure retail price stability. 

This is called a regulated market. Prince Edward Island, Newfoundland and Labrador, Nova Scotia, New Brunswick and Quebec all have some form of price regulation. 

However, many studies and reviews have shown that an open unregulated marketplace is the best way to ensure competitive pricing. Regulated price stability is usually achieved at the expense of higher prices at the pump. 

You can learn more about regulated markets in your province: