Record diesel prices hit northern Ontario businesses

Record diesel prices hit northern Ontario businesses

'It's really affecting the bottom line of anyone that's farming,' says farmer in Algoma District

Diesel prices across Canada have climbed to record levels, putting pressure on farmers, mining and truck companies who rely on fuel to keep goods moving.

For farmers like Ron Bonnett, who grows canola, soybeans, wheat and barley near Bruce Mines, Ont., the increase is hitting just before the busy fall harvest season.

The latest diesel price average across Canada is at $2.75 per litre. That's more than a dollar higher than it was this time last year, according to Natural Resources Canada.

"That's substantial, that's adding $2,000 to the cost of a tank of fuel," Bonnett said.

"It's really affecting the bottom line of anyone that's farming, whether they're growing crops, or they’re raising cattle. It's something we have very little control over," Bonnett said.

The impact of record-high diesel prices are being felt across Canada, notes Patrick De Haan, head of petroleum analysis at GasBuddy, a technology company that crowd-sources consumer fuel prices.

The ongoing U.S.-Israel war with Iran, as well as Russia’s war with Ukraine, are the main drivers behind the soaring costs, he said.

“Ukraine has found increasing success attacking Russian oil refineries. Traditionally, Russia supplies over 10 per cent of the amount of global diesel. And now Russia has since July completely banned the export of diesel,” De Haan said.

“That 10 per cent is now a zero per cent contribution. And as a result of that, global diesel supply has tightened immensely and there's basically no margin for error.”

While there have been spikes like this in the past, he does not anticipate a price drop anytime soon.

That leaves little spare refining capacity in Canada and the United States to compensate for disruptions elsewhere, De Haan said.

Mining companies brace for impact

Agnico Eagle Mines operates the Detour Lake mine in the Cochrane District and the Macassa mine in Kirkland Lake, Ont. During a company conference call in July, Jamie Porter, Agnico Eagle’s executive vice-president of finance and chief financial officer, said diesel prices are putting pressure on costs.

“Diesel represents about seven per cent of our overall cost,” Porter said.

The company has locked in prices for some of the fuel it expects to use in the second half of the year, helping to protect it from some of the recent price increases.

But Porter said diesel is expected to put more pressure on the company’s costs in 2027 than it did this year.

As for Bonnett, the harvest still has to come in regardless of what diesel costs.

"It's going to definitely reduce profitability. They only thing farmers in the grain sector can do is really look at trying to capture price fluctuations in the market," he said.

The cost of fuel will restrict the ability of farmers to upgrade equipment, he said, and will influence the crops they plant next year as they seek to reduce costs.

Bonnett said he's been working to find ways to reduce fuel consumption. This year, the farm switched to no-till technology, reducing overall vehicle use.

Compounding the grief for farmers is the rising cos of fertilizer, another knock-on effect of war in the Middle East.

The inevitable result of these rising inputs, Bonnett predicts, is higher food bills for Canadian consumers.

"When our product leaves our farm, it's being hauled on trucks. And truckers are facing the same pressure that farmers are because they're big users of diesel fuel as well," he said.

"The increase in costs goes right through the supply system."

Faith Greco is a journalist for CBC News in Sudbury, covering northern Ontario. She was previously based at CBC Ottawa. You can reach her at faith.greco@cbc.ca.