Just hours after securing a majority, the federal government announced a planned federal excise tax holiday on fuel, cutting fuel taxes by 10 cents per litre on regular gasoline and four cents per litre on diesel, in effect from Monday, April 20 until September 7. While the temporary tax cut should lower prices in theory, Patrick DeHaan, head of petroleum analysis for GasBuddy says global market movements, timing, and competition will all play a key role in what Canadians ultimately pay. Competition expected to drive pricing behaviour DeHaan says the tax cut will eventually show up at the pump, but not necessarily in a uniform or immediate way across all stations. He says stations operate in a competitive market where pricing decisions are influenced not only by wholesale costs, but also by what nearby competitors are charging. “Any competitive advantage will be utilized,” DeHaan said, explaining that stations with lower input costs will likely adjust prices strategically to attract customers. He added that retailers not immediately reflecting the full tax reduction may be at a disadvantage if nearby competitors move faster to lower prices. “The gas stations that are paying no excise tax will eventually pass it along because competitors will use it to get a leg up,” he said. However, DeHaan warned the timing of wholesale price changes could complicate that process. Tax cut expected to reach consumers While competition is expected to push prices lower, there are other factors at play. Shifts in oil markets in the days leading up to implementation could offset those savings. “In the short and long term, the gas tax excise tax holiday will be passed fully along,” he said. “What if there's an escalation on Thursday or Friday that causes the price of oil to surge and there's nothing really that you visibly see at the pump on Monday?” He noted that oil prices are currently influenced by geopolitical uncertainty, and that any increase in wholesale fuel prices later in the week could reduce or eliminate visible savings when the tax cut takes effect. Related Stories: Feeling the pinch at the pump? Taxes are a major factor, CTF says Oil market volatility keeps pressure on local fuel prices Carney secures majority government following Monday byelections ▶️ Stream this news story: 800 CHAB, Country 100, Mix 103 Diesel savings expected to be limited DeHaan downplayed the impact of the measure on diesel prices. Canada’s average diesel price is about $2.20 per litre, meaning a four-cent reduction would amount to roughly a 1.5 per cent decrease. Gasoline prices, meanwhile, could fall by about six per cent. For consumers, that could translate to roughly $4 to $8 in savings per tank. Demand concerns and supply pressures DeHaan also raised broader economic concerns, warning the tax cut could have unintended effects on supply and demand. “Oil markets are telling us that there's a large imbalance between supply and demand and lowering excise taxes, which reduces the prices that Canadians are paying, also then removes their incentive to reduce consumption at a time that supply is challenged,” DeHaan said. He noted that gasoline demand is relatively inelastic, meaning drivers do not significantly change their behaviour even when prices rise. However, when fuel becomes cheaper, drivers are less likely to combine trips, reduce travel, or rethink how much they use, which can cause demand to edge higher. “If you don’t reduce demand when supply gets cut, that does put upward pressure on prices,” DeHaan said. He added that if multiple jurisdictions take similar steps to lower fuel costs, it could further stimulate demand at a time when the market needs the opposite. Relief is temporary “This is temporary. As we get towards the end of summer on Labour Day, when this excise tax holiday ends, gas prices will likely go right back up by the amount added by the gas tax,” DeHaan said. DeHaan says Canadians should expect continued volatility from global oil markets and competitive retail responses in the days ahead. “My prediction is hopefully prices will go down,” he said, “but be prepared” for potential market shifts that could offset relief.