As of July 1, 2025, Ontario drivers are paying less at the pump, for good. The province has made its long-running fuel tax cuts permanent, locking in a 5.7 cent per litre discount on gasoline and 4.3 cents per litre on discount propane used in road vehicles. Originally introduced in mid-2022 as a temporary response to rising inflation, the tax reductions had been extended multiple times. They are now part of Ontario law.
A policy born during peak inflation
When global fuel prices surged in mid-2022, driven by supply chain disruptions, the war in Ukraine and pandemic recovery, Ontarians were hit hard. Gas prices peaked above $2 per litre in many parts of the province. In response, the Ford government introduced temporary cuts to the provincial fuel tax: 5.7¢/L for gasoline and 5.3¢/L for diesel. The goal was to ease the cost burden on households and businesses during a period of economic pressure.
According to the Ontario Government, the cuts saved the average two-car household in the province about $380 over three years.
Federal carbon tax repeal set the stage
The province’s move to make the tax cuts permanent followed a major shift in federal policy. On April 1, 2025, the federal government repealed the consumer carbon tax, which had added 17.6 cents per litre to gasoline prices in Ontario. The repeal, introduced by Prime Minister Mark Carney, also phased out the Canada Carbon Rebate, which had returned some of the costs to households.
With the federal tax off the books and inflationary pressures easing, Ontario formalized its own fuel tax relief just three months later.
What other provinces are doing and why it matters
Ontario’s decision to make fuel tax cuts permanent puts it on a distinct policy path, especially in the wake of the federal carbon tax repeal. But it also raises a broader question: How are other provinces handling fuel affordability in a time of economic uncertainty and climate pressure?
Across Canada, provinces have taken different approaches, some opting for permanent relief, others for flexible or high-tax models. By looking at Alberta and British Columbia, two provinces with sharply contrasting strategies, we get a clearer picture of how Ontario’s new policy fits into the national landscape.
Alberta: A flexible model based on oil prices
Alberta introduced its own fuel tax holiday in April 2022, removing 13 cents per litre from gas prices. Unlike Ontario, Alberta later reintroduced part of the tax and now uses a price-based formula: when oil prices are high (above $90/barrel), the tax is reduced or eliminated. This flexible system gives Alberta drivers short-term relief tied to global market conditions.
In early 2025, Alberta had the lowest average pump prices in the country — around 141¢/L — compared to Ontario’s 152–156¢/L range. These totals include all taxes, fees, and fuel costs.
British Columbia: Higher taxes, bigger swings
B.C. has the highest provincial fuel taxes in Canada, with a base rate of 14.5¢/L across most of the province, plus an additional 18.5¢/L transit tax in Metro Vancouver. On April 1, when the federal carbon tax was scrapped, gas prices dropped as much as 20 cents in some areas. Despite that, B.C. drivers continue to pay more at the pump overall than those in Alberta or Ontario — with full prices typically landing well above 160¢/L.
What the permanent cuts mean for Ontario drivers
A standard 50-litre tank now costs $2.85 less than it would have without the provincial discount. For propane-fuelled vehicles, often used in school transportation, delivery fleets and rural areas, the savings come to an additional $2.15 per tank.
For everyday drivers, this equates to about $30 to $40 per month in fuel savings. For small businesses, especially those with delivery or transportation needs, the permanent cut helps with budget stability and planning.
The long-term trade-off: savings vs. infrastructure
While fuel tax relief is welcome news for many, it comes with a cost. Ontario’s fuel taxes are a key source of funding for highways, transit and road maintenance. A six-month extension of the cuts in 2023 alone cost the province $500 million, according to government estimates.
Municipalities may now face pressure to find new revenue sources or scale back infrastructure upgrades. Critics also warn that lower fuel prices could dampen progress on electric vehicle adoption and emissions reduction goals.
What to watch moving forward
With the fuel tax cuts now locked in, attention is turning to what comes next, and where the ripple effects may land.
Ontario’s roadways may feel the strain first. With less money coming in from fuel taxes, cities and towns across the province could be left searching for ways to maintain highways, repair aging infrastructure and fund public transit. That could mean new tolls, higher property taxes or a shift in budget priorities at the municipal level.
There’s also the climate question. Making gasoline and propane permanently cheaper could undercut efforts to shift drivers toward electric vehicles or lower-emission transit options. Some policy experts warn that locking in low fuel prices may make it harder to hit long-term emissions targets, especially if demand for gas creeps back up.
And across the country, other provinces are watching closely. Ontario’s decision could set a precedent, or at least open the door to a broader rethink of how fuel is taxed in Canada. Provinces like Alberta, which already adjusts its fuel tax based on oil prices, may consider more permanent reforms. Even B.C., with some of the highest fuel levies in North America, might feel pressure to revisit its approach.
The move may have started at the gas pump, but it’s likely to reshape more than just what drivers pay to fill up.
Uncertain road ahead
Ontario’s move to make fuel tax cuts permanent on July 1 offers predictable, ongoing savings for drivers. It marks the end of a two-year cycle of extensions and signals a broader shift in how governments are responding to cost-of-living pressures. Compared to Alberta’s responsive model and B.C.’s high-tax structure, Ontario has staked out a middle ground — fixed relief with fewer price swings.
For now, drivers win. But the lasting impact will depend on how the province balances savings at the pump with long-term investments in infrastructure and climate resilience.
Sources
1. Ontario.ca: Keeping Costs Down
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
