Liberals plan to suspend federal fuel excise tax until Labour Day

OTTAWA — The federal Liberals say suspending some taxes on fuel is a “responsible” way to tame prices at the pumps, while the Conservatives accuse the government of taking half-measures as the Iran war sends energy costs surging.

Prime Minister Mark Carney announced Tuesday that his government will pause collection of the fuel excise tax on gasoline and diesel until Labour Day.

Carney said the tax break will start April 20 and is expected to save Canadians 10 cents per litre on regular gasoline and four cents on a litre of diesel.

Speaking to reporters on Parliament Hill, Carney said suspending the excise tax is a “responsible, temporary measure” that offers “real relief” to Canadian families.

Carney said the war in the Middle East has caused an “enormous shock in the global economy” and his government has to “assess what’s the best approach, given our core plan and what can we do in the short term.”

Gas prices have surged in Canada and worldwide in recent months as the conflict in the Middle East has constrained global oil shipments.

While average gasoline prices are down roughly 10 cents from the national peak of a week ago, CAA’s gas price tracker shows an average cost of $1.73 per litre at pumps across the country on Tuesday — more than 40 cents higher than a year ago.

Patrick De Haan, head of petroleum analysis at GasBuddy, said “tax holidays” on fuel are becoming more common among U.S. states.

“As a motorist, I certainly wouldn’t really complain about a $4- to $8-a-tank drop in gas prices. Ten cents a litre is not nothing,” he said.

But he also warned that the situation in the Middle East is volatile, and if developments in the Strait of Hormuz lead to fuel prices ramping up into the weekend, Canadians might not see the full discount at the pumps on Monday morning.

De Haan added that lowering the sticker price on gas also stimulates demand, which could exacerbate market imbalances and push prices higher.

“Oil, gasoline and diesel prices don’t just move because of one factor at a time,” he said. “Consumers may not necessarily see visibly a 10-cent drop if oil markets are actively climbing.”

Carney’s announcement stops short of the Conservative party’s call for the excise tax and GST on gas and diesel to be waived for the rest of the year, and for a permanent end to the clean fuel standard and industrial carbon tax.

Conservative Leader Pierre Poilievre argued in the House of Commons on Tuesday that the Liberals would not have taken any action if they had not been pushed by the Official Opposition.

But he accused the federal government of going only “half way” and for “only half the time.”

Poilievre said his proposal would cut the cost of a litre of gasoline by 25 cents.

Carney told reporters that waiving the excise tax for a little over four months will cost the federal government roughly $2.4 billion, while the Conservatives put the price tag for their proposal at around $5 billion.

The Liberals are largely paying for the excise tax cut by “recycling” the revenues from the boost Canada’s economy typically receives from higher gas prices, Carney said.

Poilievre argued Ottawa ought to go further and use the higher tax revenue to offer Canadians a steeper break at the pumps.

“That money should go back into the pockets of consumers, not into the coffers of government,” he said Tuesday.

The prime minister defended the excise tax cut as a more responsible approach to managing federal finances while supporting Canadians and the broader economy.

“We didn’t just say, ‘Get rid of all taxes on gasoline and let’s spend $9 billion as if we’re not in government,’ which is actually what you do say when you’re not in government,” Carney said.

“But when you are in government, you have to choose, you have to balance, and this is the balance we’ve struck.”

A media statement about the federal plan said it will also reduce prices for truckers and other businesses with heavy transportation costs. Carney said the excise tax will be waived for jet fuel domestically as well, as airliners contend with ballooning energy costs.

Desjardins deputy chief economist Randall Bartlett said Tuesday he expects the suspended fuel tax will shave one or two ticks off the headline inflation rate starting in May. He called that a “drop in the bucket,” with inflation set to rise sharply in the wake of the energy price spike.

Many economists agree that lifting taxes on fuel is the most direct means governments have to deal with rising energy costs — something Canadians saw at the pump a year ago when Ottawa removed the consumer price on carbon, stripping roughly 18 cents from a litre of gasoline.

But some experts weighing in on the prospect of fuel relief over the past week have argued that income supports for more vulnerable Canadians would have provided more targeted relief.

Bartlett said stripping the excise tax on fuel will disproportionately benefit higher-income households who typically spend more on gas. He added that tax cuts on gas could be politically tough for the Liberals to unwind, particularly if oil prices remain high in September.

The $2.4 billion set aside for this measure is likely affordable in the short term, Bartlett said, but the longer the conflict stretches on, the more the oil price shock will weigh on Canada’s economy.

“Over the longer term, this could just be another addition to the debt that leads to risks around long-term fiscal sustainability,” he said.

Finance Minister François-Philippe Champagne announced Tuesday the Liberals will provide an update on the federal fiscal position in a spring economic statement on April 28.

U.S. President Donald Trump said Monday the American military had begun a blockade of Iranian ports as part of an effort to force Tehran to open the Strait of Hormuz. About one-fifth of the world’s oil supply transits through the strait, which has been almost completely blocked by Iran since the U.S. first attacked six weeks ago.

De Haan said the global price of oil was down somewhat Tuesday — which may have been the market’s reaction to Iran not yet retaliating over the blockade and suggestions that the United States is still open to talks.

There’s “very little certainty” right now in the global outlook for oil, De Haan said, making it one of the most challenging times in his career for forecasting prices.

“I can’t see around the corner. I can’t hit the bull’s-eye from a mile away,” he said.

This report by The Canadian Press was first published April 14, 2026.

— with files from The Associated Press

Craig Lord, The Canadian Press