Gas, transport and interest: Rising gas prices could hit Canadians three times over

Rising fuel prices are beginning to ripple through the Canadian economy, and experts say the impact could soon extend well beyond the gas pump.

Prices have climbed several times in recent weeks, and University of Regina economist Jason Childs said that kind of increase quickly starts to affect how Canadians spend their money.

“More money is going to the gas station and less money is going to other things,” Childs said. “You’re either going to spend less somewhere else, save less or borrow more.”

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For many households, higher fuel costs are unavoidable. People still need to drive to work, run errands and transport their families.

“You’ve still got to get to work. You’ve still got to fill your tank,” Childs said.

The effects of rising fuel prices rarely stop with drivers. Transportation costs are built into the price of many goods, meaning higher diesel prices can eventually push up the cost of everything from groceries to consumer products.

Those impacts are already being felt inside Canada’s trucking industry.

Jeff Holt, owner of Flatlander Express, said the company has had to adjust its fuel surcharges as diesel prices climb regularly.

“When the prices go up at the pumps, we have to obviously pass that along to the customers,” Holt said. “The fuel surcharges change weekly.”

Fuel surcharges are additional fees trucking companies apply to shipping rates to account for fluctuating fuel costs. Holt said those adjustments are typically done weekly, but recent volatility has made the process more challenging.

“Most of the time it should be done daily because it’s going up erratically,” he said.

Even with the rising costs, Holt said many customers have become accustomed to the constant fluctuations in fuel prices.

“I think over the last little while they’ve become immune to it,” he said. “They understand.”

Holt said the additional costs do not disappear; they move further down the supply chain.

“Our customers end up paying well, who’s going to end up paying their customers? The end user,” he said. “Those are the ones that are probably going to be voicing their opinions.”

The pass-through effect is common whenever transportation costs rise, according to economists.

Childs said goods that travel long distances or require specialized shipping methods are especially sensitive to changes in fuel prices.

“If you’re shipping it a long way, if it’s heavy or bulky, that’s more likely to be exposed to transportation costs,” he said.

Products that require refrigeration during transport can be even more vulnerable.

“If you’re running a diesel-powered reefer unit where you’re keeping something cold or frozen, all of those costs go up,” Childs said.

In the short term, some businesses may absorb the higher costs rather than immediately raising prices, but Childs said that approach rarely lasts long.

“If they do have some margin, they’ll probably eat it in the short term,” he said. “But over a longer period of time, you just can’t do that forever.”

Should fuel prices remain elevated for months, Childs warned Canadians could feel the impact multiple times.

“You’ll get hit at the pumps, you’ll get hit at prices of other goods that are transported,” he said. “And if that pass-through is large and sustained, there’s a very real chance that you could get hit a third time on interest rates.”

Higher oil prices can also create economic benefits in oil-producing provinces like Saskatchewan, where government royalty revenues rise as crude prices increase. Both Childs and Holt said consumers are ultimately the ones most likely to feel the financial strain.

“Somebody’s going to benefit from it, somebody’s going to pay the cost,” Childs said. “And on this one, it’s going to be the consumers who pay most of the cost.”

Holt said that reality is something trucking companies see every day as costs move through the supply chain.

“We’re just a vessel hauling the freight,” he said. “But again, it’s always passed down to the consumer.”