How higher oil prices could pump more money out of your wallet this fall
Motorists could be paying even more to drive, on top of high costs for essentials
If the more bullish forecasts prove accurate, a return to triple-digit oil prices could be just around the corner.
We've been there before — including last year, on repeated occasions from 2011-14 and way back in 2008, when oil surpassed the $100 US-per-barrel mark.
This time around, however, Canadians are grappling with sharply higher prices for many essentials, and increasing oil prices could serve to siphon more money from their wallets to fuel their vehicles.
Calgary energy analyst Vijay Muralidharan said a few key factors influence the price of gasoline in Canada, but the underlying price of oil is the most significant.
"If crude jumps, it's a big influence on gasoline pricing," said Muralidharan, managing director of R Cube Economic Consulting Inc.
Beyond elevated prices at the pumps, however, experts say higher oil prices also have implications for the cost of food, transportation and travel — and could impact inflation.
"There is one impact that we observe ... at the pumps when we fill up our own car, but there are significantly other impacts that we are facing because the entire supply chain is operated on oil and its derivatives," said Opher Baron, a distinguished professor of operations management at the University of Toronto's Rotman School of Management.
Oil prices don't tend to influence car buyers
The price of gas is never far from the minds of drivers, who see the impact of price fluctuations every time they fill up their tanks.
With regular media attention, drivers know that when oil prices go up, fuel prices tend to follow — often more quickly than when the reverse happens, Baron said.
"The companies know how to respond really well when they have to increase prices, and when it's time to decrease, they'll do it — but it's a bit slow," Baron said.
The shift in gas prices is typically something people have to deal with if they drive to work or school, he said.
But do climbing oil prices have an impact on the kinds of vehicles that people choose to buy?
Huw Williams, national spokesperson for the Canadian Automobile Dealers Association, said it's not that easy to predict where oil prices will and will not go, and consumers are aware of that.
As a result, they "are not immediately sensitive to price changes in oil," and so tend to choose their vehicles based on their overall needs, rather than strictly on their fuel economy, he said.
There have been occasions in the past, though, when consumers bought bigger vehicles after fuel prices dipped.
Impact on leisure travel
Higher gas prices make it more expensive for those travelling by car for leisure — whether for a day trip or a weekend getaway.
The University of Toronto's Baron said consumers can make more discretionary choices about leisure travel than they can about commuting and may adapt their plans based on the costs involved.
"When we make our personal choices on travelling, if it's more expensive, well, I'll do something else, right?" he said. "I'll travel less, I'll drive rather than fly and so on."
The cost-driven choices that consumers make are also relevant to the tourism operators and destinations aiming to welcome visitors.
That's the case in Nova Scotia, where a new slate of ads promotes fall travel. Tourism officials are paying close attention to prospective tourists' concerns.
"We recognize that costs, including the price of gas, are influencing people's travel decisions," Amelia Jarvis, outreach and engagement adviser for Tourism Nova Scotia, said via email.
Atlantic Canadians normally make up the largest group of visitors to Nova Scotia — as was the case last fall — though fewer from the region are visiting than before the COVID-19 pandemic. Jarvis said research suggests "price sensitivity" may be contributing to this trend.
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"In the first six months of 2023, visitation from Atlantic Canada was down 15 per cent compared with the same period in 2019, prior to the pandemic," she said. "However, Atlantic Canadians continue to be the largest source of visitors to the province, typically making up about 40 per cent for the entire year. They are also more likely to travel in Nova Scotia in the fall and winter months. "
Higher cost of transporting food
Higher costs for oil also have an impact on the cost of diesel — the fuel that powers the trucks that bring food to stores across the country.
Muralidharan, the energy analyst in Western Canada, said when the cost of transport goes up, that tends to get passed along to consumers.
Grocery stores, he said, "don't want to bear the cost, because it's going to hit their profit margins."
Food prices, which have been a challenge for many Canadians this year, have become a political issue.
Ron Lemaire, president of the Canadian Produce Marketing Association, said while there are many costs involved in growing and getting produce to retailers — including labour, farm machinery and fertilizer — fuel costs are also a factor in driving food inflation.
However, Lemaire said, the extent to which fuel costs get passed on to consumers depends on the degree to which they are absorbed by other players in the supply chain.
The availability and demand for freight services at a given time also play a role, he said.
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With files from the CBC's Laura MacNaughton and Nisha Patel