In the 1990s, the Quebec government put in place a price floor on gasoline to protect independent fuel stations that were rapidly disappearing. The price floor was abolished June 7, 2025. By then, most independent fuel stations had disappeared and the price floor was a relic of the past. The consensus was that the price floor no longer affected gasoline prices in Quebec.
In this blog post, I test whether this was indeed the case. That is, we will test whether gasoline prices in Quebec declined following the removal of the price floor. We will begin by examining the data. Then I will use an event study to check whether gasoline prices declined in Quebec after the price floor was abolished. Finally, this leads me to examine longer trends in gasoline prices in Quebec relative to other provinces.
The data
The weekly data for regular gasoline prices are from Natural Resources Canada (NRC). NRC also makes available data on mid-grade gasoline, premium gasoline, diesel, auto propane and furnace oil. I focus on regular gasoline. I use weekly data but they are also available at daily and monthly intervals. NRC reports regular gasoline prices for 71 locations across Canada. I do not know whether these data represent an average of prices collected in each city or the price at a representative fuel station.
Figure 1 shows average gasoline prices in Quebec and Ontario. I show only these two provinces so as not to overload the figure. The values represent average prices observed in the two provinces. They are not weighted according to sale volumes.
Gasoline prices in Quebec and Ontario tracked well until 2022 when they began to diverge. Since then, Quebec’s average price has been higher than the Ontario average price. The Ontario price dropped relative to Quebec price in April 2025 because the federal government removed requirements for provinces and territories to have a consumer-facing carbon price, applied on gasoline in most provinces through the federal fuel charge. More on that later. With the beginning of the war in Iran, gasoline prices surged in March 2026.
Components of gasoline prices
NRC offers a break down of gasoline prices as taxes, the marketing margin and the refining margin. From these components, we can calculate an oil price, inclusive of transportation. The margins are approximations calculated by NRC.
The marketing margin is the difference between the retail price and a wholesale (rack) price collected directly from Canadian wholesalers. My understanding is that for Quebec the rack price includes the carbon tax. I collected the carbon auction results and calculated from them the carbon tax that applies to gasoline. I then calculated the rack price free of the carbon tax. The refining margin is the difference between the wholesale price and a crude oil price. NRC explains how it estimates oil prices for the different regions in Canada. From the data, we can calculate oil prices as follows:
Price of oil = Price - taxes - marketing margin - refining margin.
Figure 2 shows NRC estimates for the components of gasoline prices, and the oil price I calculated from the NRC data. For Quebec, I entered the carbon with the other taxes and corrected the margins accordingly.
Oil prices are slightly higher in Quebec than in Ontario. NRC observes that Quebec and Ontario obtain crude oil from different sources. The feedstock for gasoline refining in Ontario is from western provinces. In Quebec and the Maritimes, the feedstock is imported light crude. The refining margin is higher in Ontario. The marketing margins in Quebec and Ontario are volatile and tend to be higher in Quebec. Finally, taxes are higher in Quebec and we can clearly see the impact of the removal of the carbon tax in Ontario.
Gasoline taxes
Together, Figure 1 and Figure 2 show that taxes are a significant share of the price paid at the pump for gasoline. At the end of June 2026, taxes made about 22% of the pump price in Quebec and 17% of the pump price in Ontario. Let’s examine the different taxes that apply to gasoline in Quebec and Ontario. Figure 3 shows taxes on gasoline in Quebec and Ontario.
The federal government charges a $0.10/l excise tax. A temporarily suspension applies since April 20, 2026 to help customers following high fuel prices caused by the war in Iran. It will end on September 7, 2026. In Quebec, a $0.19/l excise tax applies on gasoline. That rate is lower in regions away from the large population centres and bordering other provinces. In Ontario the provincial excise tax is $0.09/l.
Quebec is currently the only province that maintains carbon pricing through a cap-and-trade system. The carbon cost applied to gasoline depends on the outcome of auctions on the Québec cap-and-trade system (linked to California). In other provinces, except for British Columbia, the federal fuel charge applied starting in 2019 and was removed in April 2025. British Columbia had its own carbon tax, which was removed at the same time as the federal fuel charge. The federal fuel charge increased following a schedule on the cost of carbon emission. Before the fuel charge was removed, Ontario paid a higher carbon tax on gasoline than Quebec.
GST and HST/QST are percentage taxes that are added on top of every fuel costs, including the provincial and federal excise taxes and the carbon tax. For that reason, the total tax collected increases with higher fuel prices.
Event study of the removal of the price floor
An event study is one of the most useful empirical methods in an economist toolbox. It is particularly useful when a shock affects a treated group but not a comparable control group, creating a natural experiment that can be used to estimate causal effects.
The removal of the floor price on Quebec gasoline is akin to a natural experiment. It does not meet all the conditions necessary to identify a causal effect. I’ll spare you the reasons why that is the case. However, I think we can learn about what has happened in the Quebec gasoline market using an event study.
Event studies will extract the part of the price paid in fuel stations in Quebec that cannot be explained by prices observed elsewhere. Thus, if we observe a sudden decline in gasoline prices in Quebec relative to other regions in Canada right around the time the price floor was removed, that would provide evidence that the removal of the price floor contributed to lower gasoline prices.
I perform an event study using prices inclusive of taxes. However, I control for the removal of the federal fuel charge. That is, the event studies will assume that the federal fuel charge was never removed. Otherwise, we would observe a significant increase in gasoline prices in Quebec relative to those in other Canadian regions.
Figure 4 shows the outcomes of event studies using the Maritimes (New Brunswick, Nova Scotia and Prince Edward Island), Ontario and the West as controls. Out of the three groups, I consider that Ontario offers the best control group because of its greater similarity to Quebec. I use data beginning in January 2022. I add a variable to control for the removal of the federal fuel charge. The cyan vertical line shows the date when the price floor was removed.
The three panels show very similar outcomes. There is no apparent decrease in Quebec gasoline prices relative to the controls that could be associated with the removal of the price floor. Note that I performed event studies in various ways and none showed that removing the price floor had an impact on gasoline prices in Quebec relative to other Canadian regions.
What is noticeable in Figure 4 is a downward trend, shown in blue. I could have controlled for these trends, and that would have been appropriate in an event study. I decided to keep them because I find them interesting. They show that over the last two years prices in Quebec have declined relative to other provinces, once taking into account the removal of the federal fuel charge. Relative to gasoline prices in the Maritimes, gasoline prices in Quebec have decreased by $0.06/l per year. Relative to Ontario and the West, gasoline prices in Quebec have declined by $0.07/l per year.
I do not know what caused gasoline prices to decline relative to other provinces. To gain a better understanding of what has been happening, I examine long term trends in prices in Quebec relative to other Canadian regions.
Long term trends
I check in this section what could explain the downward trend observed in Figure 4. I will perform a graphical analysis of the difference between values observed in Quebec and in other Canadian regions. A positive difference will mean that the value observed in Quebec is higher than the value observed in the comparison region. A negative difference will mean that the value observed in Quebec is lower than the value observed in the comparison region.
Prices
Figure 5 shows the difference in the prices for regular gasoline in Quebec and other Canadian regions. The black lines smooth out the data to more easily observe trends.
Regular gasoline prices are on average higher in Quebec than in other Canadian provinces, except for short periods. They are most similar to the Maritimes. Prices in Quebec have been rising compared to the Maritimes since 2024 and have been rising compared to Ontario and the West since 2020.
We do not observe in Figure 5 the downward trend identified in Figure 4. That is because in the event studies I controlled for the removal of the federal fuel charge and I used data starting in 2022. Figure 5 clearly shows the impact of the removal of the federal fuel charge in 2025. If it was not for the removal, we could trace in Figure 5 downward trends for each of the comparison regions.
Prices net of taxes
The trends observed in Figure 5 were largely affected by taxes. Let’s examine using Figure 6 how prices net of taxes have evolved.
Net of taxes, gasoline prices tend to be lower in Quebec compared to other regions. This suggests that the burden of gasoline taxes does not entirely fall to consumers, a standard economic result. The figure shows that net of taxes, gasoline prices have fallen in Quebec compared to other Canadian regions since late 2023.
Marketing margin
NRC calculates the marketing margin as the difference between the retail price net of taxes and a rack price it collects. It is an estimation. Nonetheless, it should inform us about how the actual marketing margins trend.
Figure 7 shows the difference between the marketing margins in Quebec and other regions. The differences are small, and do not contribute to much of the total difference observed in Figure 5. Compared to other regions, marketing margins in Quebec were higher between 2022 and 2025. The difference has been trending down since 2023 and marketing margins in Quebec are lower than in other regions in 2026.
Refining margin
Refining margins are the difference between the rack price and the oil price. NRC does not observe those prices but calculates reasonable estimates that will allow us to observe how refining margins have trended relative to Quebec. Figure 8 shows how refining margins have evolved compared to Quebec.
Refining margins are lower in Quebec according to the NRC data. The differences in the refining margins for Ontario and the West are much larger than the Maritimes. As we will see next, this is partly because the oil prices in the Maritimes are nearly identical to oil prices in Quebec. The refining margins in Quebec increased relative to Ontario and the West between 2018 and 2021, and then declined since.
Oil price
NRC approximates oil prices according to where provinces source crude oil and adds to it transportation costs. Figure 9 shows the difference between estimated oil prices for Quebec and other regions. For the Maritimes, the difference is small because Quebec and the Maritimes obtain crude oil from the same sources. Crude oil prices in Quebec are higher than in Ontario and the West. The differences have generally declined since 2018 with a temporary increase between 2021 and 2023.
What to make of all of this?
The figures above show that gasoline prices remain higher in Quebec, but the gap relative to other provinces narrows once changes in carbon pricing are taken into account. However, once removing taxes, gasoline prices in Quebec are lower than in other provinces and that they have decreased relative to them recently. Taxes are the main reason for higher gasoline prices in Quebec. Moreover, the tax burden to Quebec gasoline customers has increased relative to other provinces because the federal fuel charge was removed in other provinces but the carbon tax has remained in Quebec.
The graphical analysis of the marketing and the refining margins suggest a positive pass-through of retails taxes upstream the supply chain. An elaborate econometric analysis would be necessary to determine if this is effectively the case.
The data from NRC show that, after taxes, it is higher prices for crude oil that explain the most why gasoline prices are higher in Quebec. The difference has been diminishing but remains meaningful.
Conclusion
The event study shows that the removal of the price floor on gasoline in Quebec did not cause lower gasoline prices. This is consistent with the consensus before the price floor was removed. The event study shows a downward trend in Quebec gasoline price relative to other Canadian regions. A graphical analysis shows that this was due to the period investigated and the fact that the event study controlled for the removal of the federal fuel charge. Taxes and higher crude oil prices are the main reasons for higher gasoline prices in Quebec.
This blog post offers a rudimentary analysis of gasoline prices in Quebec. A lot more could be done. Studying the tax pass through would be particularly interesting. There are already studies that estimate the tax incidence on consumers elsewhere in Canada and find that it is less than 100%. Recent changes in taxes, particularly related to carbon, provide good opportunities to estimate the tax pass-through.