Canada extends the federal fuel tax suspension until January 31, 2027

On September 2 local time, Canadian Finance Minister François-Philippe Champagne officially announced that the federal government will extend the federal fuel excise tax suspension policy for gasoline, diesel and aviation fuel until January 31, 2027, in order to offset the upward pressure on international crude oil prices brought by the geopolitical conflict in the Middle East and ease the fuel cost burden on residents and industries such as logistics, agriculture and construction.

The tax cut policy was first launched in April 2026 and was originally scheduled to expire on September 7. Under the policy, 10 Canadian cents per liter of gasoline and 4 Canadian cents per liter of diesel will be exempted, and aviation fuel will also enjoy the excise tax suspension simultaneously, directly reducing the retail price of terminal oil products.

According to the newly announced schedule, the fuel excise tax will be levied at half price from February 1 to March 31, 2027, and will be fully restored starting from April 1, 2027, adopting a phased return to avoid sharp oil price fluctuations caused by one-off tax rate hikes.

The extended policy is expected to cause about 2.4 billion Canadian dollars (equivalent to 1.7 billion US dollars) in revenue losses to the Canadian federal government. It should be noted that this only applies to the federal fuel excise tax, and the 5% Goods and Services Tax (GST) on gasoline is not included in the exemption scope and will still be levied normally.

The government stated that the core background for the extension decision is that the Middle East conflict has disrupted the oil transportation channel in the Strait of Hormuz, and international crude oil prices have risen by about 30% compared with before the conflict. The fuel tax suspension can directly benefit ordinary car owners, while reducing the operating costs of industries highly dependent on fuel such as freight, food delivery, agriculture and construction.

Industry analysts believe that this policy will support domestic refined oil consumption in Canada in the coming months and buffer the transmission of international crude oil price hikes to domestic terminals to a certain extent, but cannot change the general trend of international oil prices. The follow-up policy direction will still closely follow the situation in the Middle East and the trend of crude oil prices.