Gas prices are a major concern for drivers in both the United States and Canada. With fluctuating crude oil prices and differences in gas taxes and regulations, gas prices can vary significantly between the two countries. This article will compare gas prices in the USA and Canada to determine which country generally has cheaper gas.
Quick Answers
Is gas cheaper in the USA or Canada on average?
Gas is generally cheaper in the United States compared to Canada. According to global petroleum analysts, average gas prices in the US are lower than Canada by anywhere from 10 to 45 cents per gallon.
Why is gas cheaper in the USA?
There are several key reasons why gas tends to be less expensive in America:
– Lower gas taxes – The US federal gas tax is 18.4 cents/gallon vs. 10% sales tax in Canada amounting to 28 cents/gallon or more. This accounts for a significant portion of the price difference.
– More domestic refineries – The US has many more oil refineries (135) compared to just 19 in Canada, so more supply capacity keeps US prices lower.
– Higher Canadian demand – Canada consumes more gasoline per capita than the US, straining supply and keeping prices higher.
– Stronger US dollar – The US dollar is stronger than the Canadian dollar, so any oil priced in USD is cheaper for Americans.
When is gas actually cheaper in Canada?
During periods of high global crude oil prices, gas prices in both countries tend to converge. Cities near the US-Canada border may occasionally find cheaper gas across the border as prices fluctuate. Some provinces like Alberta also have lower gas taxes making gas occasionally cheaper there than in US border states. But generally, cheaper gas prices prevail in the US.
Gas Price Trends in the USA and Canada
Analyzing historical gas price trends shows that prices have indeed tended to be lower in the United States compared to Canada over the past decade.
Average Gas Prices (2011-2021)
| Year | Average Gas Price in USA (per gallon) | Average Gas Price in Canada (per gallon) |
|---|---|---|
| 2011 | $3.52 | $4.07 |
| 2012 | $3.62 | $4.18 |
| 2013 | $3.51 | $4.04 |
| 2014 | $3.36 | $3.85 |
| 2015 | $2.43 | $3.19 |
| 2016 | $2.14 | $2.68 |
| 2017 | $2.41 | $3.16 |
| 2018 | $2.72 | $3.42 |
| 2019 | $2.60 | $3.28 |
| 2020 | $2.17 | $2.83 |
| 2021 | $3.01 | $3.56 |
This table summarizes the average annual gas prices over the past 10 years in the United States and Canada. Prices peaked in 2012-2014 before plummeting in 2015-2016 as oil prices crashed globally. The trend shows gas prices averaging 10 to 45 cents per gallon cheaper in the US. The smallest difference was in 2020 during the oil price slump induced by the pandemic.
Generally, gas prices follow similar trajectories in the two countries based on global oil prices. But taxes, supply factors, and currency differences account for the persistent price advantage in the United States.
Provincial Differences in Canada
Gas price variations also exist between different provinces and cities within Canada. This is because provincial taxes have a significant impact on gas prices. Here are the average prices across major Canadian provinces:
Average Gas Prices in Major Canadian Provinces (2021)
| Province | Average Price (per gallon) |
|---|---|
| Alberta | $2.95 |
| British Columbia | $3.54 |
| Ontario | $3.79 |
| Quebec | $3.61 |
| Manitoba | $3.15 |
| Saskatchewan | $2.90 |
Provinces like Alberta and Saskatchewan with lower gas taxes have cheaper gas. Canada’s national average is pulled up by pricier provinces like British Columbia and Ontario with urban centers like Vancouver and Toronto.
Key Factors Influencing Gas Price Differences
Now that we’ve compared current and historical prices, let’s analyze the key reasons and factors causing the gas price gap between the USA and Canada.
Taxes
Taxes make up a significant portion of gas prices in both countries. But Canada has higher gas taxes overall, which adds to the retail price at the pump.
The US federal gas tax is just 18.4 cents per gallon. State gas taxes vary from 12 cents to 58 cents/gallon. Most states average around 30 cents/gallon in total gas taxes.
Meanwhile, Canada levies much higher federal and provincial fuel taxes that can add 25 to 45 cents or more per liter of gas. Most provinces have a sales tax of 10-15% charged on top of the retail gas price. When converted to gallons, the average Canadian could be paying 30 to 50 cents more per gallon in taxes.
Alberta has the lowest gas taxes in Canada with just 19 cents/gallon while Vancouver has the highest taxes approaching 73 cents/gallon.
Supply and Refining Capacity
Another major factor is refining capacity. The United States has far more oil refineries – about 135 of them across the country. Canada in comparison only has 19 refineries, mostly clustered in Alberta which has the cheapest gas prices.
This greater supply capacity for fuel production and distribution makes gas more available and cheaper in most parts of the US. Canada’s higher demand and limited refining infrastructure works to push prices up.
Exchange Rates
World oil prices are denominated in US dollars. With the Canadian dollar usually weaker than the US dollar, any global oil price increase gets amplified for Canadian consumers paying in CAD.
The US dollar has been about 25-30% stronger than the Canadian dollar over the past decade. So Canadians must convert more of their native currency to pay the USD-based oil prices, impacting retail gas as well.
Demand
Canadians also consume more gasoline per capita annually than Americans. Canada consumes about 24 gallons per month per capita compared to 22 gallons in the US.
This increased demand without the corresponding supply infrastructure contributes to higher gas prices as availability decreases. Urban sprawl in major Canadian cities has also increased driving distances and gas usage.
Cross-Border Price Variations
Gas prices can sometimes vary greatly between adjoining towns and cities across the US-Canada border. This is especially true in border regions like the Pacific Northwest, Midwest, and Great Lakes regions.
Whenever there is significant price divergence, it creates an arbitrage for drivers to fill up in the cheaper country. However, this cross-border shopping for gas declines when prices converge or taxes negate savings.
Here are some examples of potential gas price differences between border city pairs:
Gas Price Differences Between Select US & Canadian Border City Pairs
| Border Cities | US Price | Canada Price |
|---|---|---|
| Detroit, MI vs. Windsor, ON | $3.10/gallon | $3.90/gallon |
| Buffalo, NY vs. Fort Erie, ON | $3.05/gallon | $3.70/gallon |
| Bellingham, WA vs. Vancouver, BC | $2.90/gallon | $4.20/gallon |
These stark price differences often prevail during periods of high oil prices or significant exchange rate gaps. However, the relative savings may be reduced once you factor in the cost of traveling longer distances across the border to fill up.
Impacts of Cross-Border Price Differences
These cross-border gas price gaps have several economic impacts, both short-term and long-term.
In the short run, lower gas prices may encourage more driving and consumption in the cheaper country. This increases demand in border regions like Buffalo or Bellingham.
However, over the long run, consistently cheaper gas prices in one country can reshape driving habits and commute patterns. More drivers may opt to work or setup businesses on the side with cheaper gas, ultimately impacting economic development and employment trends in border regions.
Governments also lose gas tax revenue when drivers fill up across the border. These economic impacts have led some provinces like British Columbia to advocate for a national Canadian gas tax to reduce inter-provincial price differences that encourage cross-border driving.
Future Gas Price Trends and Forecasts
Looking ahead, what are expert forecasts saying about future gas price trends in the US and Canada?
Overall, most analysts expect the current energy outlook to persist over the next decade, with gas remaining cheaper stateside.
Here are some gasoline price projections for 2030:
Gasoline Price Forecasts for 2030
| Country | Forecasted Gasoline Price Per Gallon (2030) |
|---|---|
| United States | $3.80 |
| Canada | $4.25 |
These forecasts reflect an expectation that oil prices will rise moderately due to recovering demand and tighter supply. The US is still expected to maintain its structural advantages in refining capacity and taxes keeping its prices more affordable.
Canada’s gasoline costs will remain stymied by high urban demand, limited refining infrastructure, higher taxes, and a weak loonie relative to the greenback. Therefore, the existing gas price gap is likely to persist for the foreseeable future.
However, alternatives like electric vehicles are shaping habits in both countries. As EV adoption rates rise steadily, reliance on gasoline could decline and ease future price pressures. But for now, the gas price advantage lies firmly with the United States.
Conclusion
Based on a detailed analysis of current and historical prices, taxes, supply factors, and expert forecasts, gasoline consistently costs less in the United States compared to Canada.
The average price difference ranges from 10 cents to over 45 cents per gallon, although regional variations exist, especially between border cities.
Cheaper gas in the US can be attributed to lower fuel taxes, higher refining capacity, stronger currency, and lower per capita demand. Canadian gas prices are dragged up by higher taxes, limited refining, higher consumption and a weaker dollar.
These structural factors are likely to persist, maintaining the US gas price advantage over Canada for the foreseeable future. Drivers north of the border can expect to pay a premium to fill up for years to come.