Low gas prices may cost Ontario government $210M in HST revenue
Published Wednesday, January 14, 2015 12:12PM EST Last Updated Wednesday, January 14, 2015 8:42PM EST
While Albertans and Ottawa are already anticipating the budgetary effects of plunging prices at the gasoline pumps, Ontario is touting the "indirect positive benefits," even as an expert warns the province stands to lose $210 million in revenues as a result.
Over the past four weeks, drivers in Toronto have seen a nearly 12 cent drop in gasoline prices, including a nearly six cent reduction this past week. Some GTA stations were selling a litre of gas for 80 cents a litre Wednesday.
A year ago this month, gas prices hovered around $1.25 to $1.30 a litre in the city.
The reduced prices mean the average Canadian is pocketing a significant amount in savings.
"You take oil down from $115 to $45 a barrel, and the global consumer is saving close to $2 trillion," senior investment analyst Wolfgang Klein told CTV Toronto on Wednesday.
A spokesperson for Ontario’s Ministry of Finance said the low prices at the pump mean Canadians are also getting “lots of indirect positive benefits… both for family finances, but also for government revenues.”
Some places where consumers can expect to see savings include the grocery store, due to lower energy and transportation costs for manufacturers and farmers.
“You can see a two or three per cent decline in the cost of living in general,” petroleum analyst Dan McTeague said.
Real estate analysts say lower crude prices are also expected to stimulate the GTA housing market.
"Lower gasoline prices are making people feel richer," Royal LePage president and CEO Phil Soper said. "They are more likely to make major purchases such as cars and homes."
Net negative effects?
But some experts are warning of the "net negative" effect of low gas prices.
McTeague says the Ontario government stands to lose $210-million in HST revenue from automotive gas sales if prices continue to hover near 90 cents per litre.
"There's now a belief that this may not be the net good, but it may actually turn out to be a net negative for many of the provinces," McTeague told CTV Toronto.
Meanwhile, in Alberta, Premier Jim Prentice warned Tuesday that the province could lose between six- and seven-billion-dollars in revenue due to falling oil prices.
His comments came the same day Suncor said it was cutting 1,000 jobs and slashing $1-billion from its 2015 budget.
"This country doesn't have a growth plan," Deputy Liberal Leader Ralph Goodale told CTV News Tuesday. "It has a plan that has proven to be an economic failure."
TD Bank is predicting that the federal government will see significantly less revenue this year, and expects that the projected $2-billion surplus in 2015-16 could be turn into a $2-billion shortfall.
With a report from CTV Toronto's Zuraidah Alman