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With diesel prices skyrocketing due to ongoing global conflicts, filling up the trucks that carry food and goods across Canada has never been more expensive, experts say — and Canadians could be feeling it soon.
“It’s very bad,” Tej Dulat, director of government and public affair with the Canadian Truck Operators Association, told CBC News.
A commercial truck goes through hundreds of litres every week, making fuel one of the biggest costs for trucking companies, Dulat said. And while the industry can usually absorb a brief spike in prices, he said, the margins have been tighter since prices jumped in 2022, when Russia invaded Ukraine.
Now, prices are even higher.
“End of the day, companies have to pass that cost to the consumers,” Dulat said.
“You’re going to see that impact coming on the grocery prices.”
As of Saturday prices sat at $2.62 per litre across Canada for diesel, surpassing last week’s high of $2.52 after a brief dip earlier this week. That’s more than a dollar higher than it was this time last year, according to Natural Resources Canada, and higher than the top weekly average in 2022, which came in at $2.30.
It’s worse in some regions — Vancouver sat at $2.92 per litre on Saturday. And in the U.S., the average price of diesel hit a record-high on Friday at more than $6 US per litre, sending shockwaves across the country.
Much attention over the past few weeks has been on the potential impact of tariffs on the price of Canadian goods, but this jump in oil prices suggests that geopolitical conflicts are having a bigger impact right now, experts say.
Industries that depend on diesel fuel are also feeling the pinch of high oil prices. In Alberta, some farmers say diesel is costing them 80 cents more per litre than it did last year, and that’s cutting into their bottom line.
Bank of Canada governor Tiff Macklem said last week that while tariffs could hit some sectors hard, they don’t expect them to strongly impact Canada’s overall level of economic activity.
But the ongoing U.S.-Israel war with Iran, which is the main driver keeping gas prices high, could mean a spillover in cost from gas to other goods shortly, he said.
“The longer oil prices and refinery prices stay high, the greater the risk that higher energy prices spill over and turn into persistent inflation.”
Not enough supply
The problem is that diesel is in extraordinarily short supply, experts say. Net exports of diesel/gasoil from the Persian Gulf region had dropped to just over a quarter of pre-war levels as of August, according to a report published Friday by the International Energy Association.
Meanwhile, other geopolitical stressors are also putting strain on the amount of diesel available. One of the world’s biggest producers, Russia, recently extended a ban on diesel exports after Ukraine damaged a number of oil refineries.
Canada’s largest refinery, the Irving Refinery in New Brunswick, is also shut down until November for maintenance, further limiting supplies.
The federal government announced last week that a temporary suspension of the federal fuel excise tax, including a four cent per litre tax on diesel, would be extended through January 2027, instead of expiring on Sept. 7.
But experts say that doesn’t absorb enough of the costs.
“This is going to be somewhat of a secret killer of the North American economy, if this is not addressed in the next few months,” Patrick De Haan, head of petroleum analysis firm Gas Buddy, told CBC News.
In Nunavut, the hamlet of Igloolik is running dangerously low on fuel and some fear the shortage could affect essential services. Arty Sarkisian reports.
Although conflict has continued between U.S. and Iran since a brief agreement in June crumbled, Iranian officials said Friday that Iran will be meeting with Iraq and other countries around the Persian Gulf in Oman on Monday to discuss safe commercial shipping routes in the Strait of Hormuz.
Should Canadians brace for an expensive winter?
Diesel prices historically rise even more in the winter, according to energy analyst Dan McTeague, meaning “we could be looking at a very, very expensive winter ahead, not just for truck, for transport industry, airlines, trains and whatnot, but also for consumers.”
It’s a concern for Canadians, as any time the price of diesel goes up, it impacts every part of the food supply chain: shipping, storing and producing, according to Evan Fraser at the University of Guelph’s Arrell Food Institute.
Usually there’s a long lag between a bump in diesel prices and the trickle down to grocery shelves, and some diffusion of impacts, but he suspects this time will be different.
That’s due to how many factors are impacting it, he said, including heat waves affecting harvests.
“You’ve got a perfect storm of problems creating endless upward pressure on the price of food.”
Fraser worries we could be heading for a “new normal” of elevated food prices for the next decade because assumptions we once relied on for global food production and trade — low and stable energy prices, a productive environment for food growth and “easy geopolitics for trade” — are no longer so reliable.
“In the short term, it’s going to be really hard for low- income Canadians.”
