‘It’s almost immediate’: How surging diesel prices could hit every Canadian’s wallets

TORONTO - Diesel prices across Canada hit another record high on Thursday at $2.751 cents per litre, according to Kalibrate analytics - but industry experts say you don’t need to be driving a diesel powered vehicle to be feeling the hit to your wallet.

With Canada’s transportation network dependent on diesel to move everything from groceries and furniture to electronics, every Canadian is expected to feel the financial hit of surging global diesel prices, if they haven’t already.

“Pretty much everything that we use, anything that is transported by truck, (or) by rail, or anything that goes from sea to the rail to trucks, all gets this cascading knock-on effect and it’s real and it’s almost immediate,” said Dan McTeague, gas analyst and head of Canadians for Affordable Energy.

He said Canadian businesses are already passing on to consumers the higher transportation costs caused by diesel price increases earlier this year. With diesel prices continuing to rise, those costs are expected to increase further.

“In the next couple of weeks, businesses will be notified that they are going to be subject to additional fuel surcharges,” said McTeague.

“We’ll see a signal in the next 30 to 60 days that higher fees to take that mode of transportation will go through -- so it does have a real direct, and immediate impact on inflation and the cost of pretty much everything.”

McTeague added that the “cost of living in this country will go up correspondingly.”

Diesel shortages around the world

Diesel prices are surging because of a combination of high crude oil prices and an increasingly severe shortage of refined diesel around the world.

Oil remains above US$100 a barrel amid continued instability in the Middle East, where attacks have disrupted major pipelines, refineries and shipping routes.

At the same time, Ukrainian strikes on Russian refineries and restrictions on Russian fuel exports have further reduced global diesel supplies.

That has pushed diesel refining margins to record levels in some markets, meaning the cost of turning crude oil into diesel has risen dramatically even when crude prices themselves ease.

The result is a particularly tight global diesel market, with higher costs filtering through to trucking, agriculture, construction and the broader supply chain.

“There is no end in sight to this problem,” said Richard Masson, former CEO of the Alberta Petroleum Marketing Commission.

“The refineries are damaged in many parts of the world -- and so it’s not like we can just pick a switch and turn them back on. It’ll take months. So yes, there’s a lot of pressure in the system right now.”

Masson adds that Canada is better off than other countries because it has its own refineries. However, when there is a global decrease of supply, all diesel consumers see a price increase.

What’s adding to the surge in diesel prices is also the belief that the situation with the supply chain in the Middle East doesn’t appear to have an end in sight in the near future.

“If everybody thought this was a two-month blip, they might be able to absorb the costs and get back to normal,” added Mannon.

“But the situation looks like it’s going to carry on for months -- and in that world, everybody who’s paying these higher costs is going to try and pass it on to their customers. The impetus is to try to pass on your costs to make sure you don’t go out of business.”