How Much Will the Ontario Economy Save With Cheaper Gas?

I've blogged in the past about how much Ontario pays for gasoline. Ontario produces very little oil itself, so almost all gasoline is imported.  Obviously with oil prices cratering, the amount Ontario overall pays for gasoline will go drastically down.

This Bloomberg article says that Canadian drivers will save $30 per week (around $1500 per year). That seems high to me. Assuming 5,000,000 million drivers in Ontario that means $7..5 billion is being saved (and that's in after tax dollars) per year with the cheaper prices.

A lot is being saved in any case. Ontario will lose out on some taxes as their 8% portion of the HST will decline with cheaper gas. However this money could well be spent on other items that HST is charged on so it is probably a wash for the government. Likely anyone selling goods and services that are purchased with disposable income are going to have more sales. Or Ontarians will put it towards debt reduction (which I doubt).

One issue for Ontario is that the banks headquartered here aren't likely to do well with lower oil prices and that means lower corporate income tax for Ontario, where corporate tax receipts have already been under expectations recently. The stock market is also crashing, with the TSX not much up year to date. That means less in taxes for capital gains. I'm not sure whether the big savings in gas counteracts these effects for the Ontario economy, although the lower dollar has to help exports and hurt imports (including tourism dollars spent in the US).

How Much Extra Money is Ontario Getting from the HST Taxes on Gasoline

One aspect of the recent implementation of the HST is the extra 8% tax levied on gasoline in Ontario (compared to the 5% from GST previously). One nice thing about the HST on gasoline is that it keeps rising with inflation. If the base price of gasoline goes up, so do the revenues from the HST with no need for a messy legislated rise in taxes. The other excise taxes don't have this property and haven't changed much recently (the provincial fuel tax is 14.7 cents per litre and the federal excise tax is 10 cents per litre).

I'm going to make a real half-assed guess as to how much extra income the Ontario government gets from the HST on gasoline. I'll say the average Ontarian pays $500 a year on gasoline (that's average over everyone, not everyone who has a car and this I think is a conservative estimate). That's $37.04 in extra HST taxes in Ontario per person. Looking at wikipedia, there's an estimate of Ontario's population as 13,210,667 people, which works out to $489323105.68 or close to half a billion dollars per year. That's pretty sizeable and begs the question as to whether the HST was as revenue neutral as the provincial government claimed it was.

The $500 number is just an educated guess. If I can get a number on the amount of gasoline sold in Canada or Ontario, I can make a better estimate, although it will fluctuate pretty wildly with the price per litre. In any case, I think it's an interesting number and I never really saw it reported much in the press, which is a little surprising, considering it isn't particularly hard to break out.