The Price of Diesel is Skyrocketing. Here’s Why Canadians May Soon Feel It at the Grocery Store

As gas prices tick up by the day in Canada, few are paying attention to a far more insidious threat: the soaring price of diesel fuel. The $2.62 per liter mark set last Saturday may not seem like a dramatic increase, but experts warn that this is no minor blip – it’s a canary in the coal mine for an economic perfect storm.

The root cause lies in the ongoing US-Israel-Iran conflict, which has driven gas prices to record highs south of the border. The Bank of Canada’s Governor Tiff Macklem acknowledged that oil prices and refinery costs staying high pose a significant risk to inflation. If these prices persist, Canadians will likely feel the pinch in their grocery bills.

Diesel fuel is a major expense for commercial trucks, which account for hundreds of liters per week. With margins already tight since Russia’s invasion of Ukraine in 2022, trucking companies are struggling to absorb rising costs. Tej Dulat, director of government and public affairs with the Canadian Truck Operators Association, bluntly stated: “Companies have to pass that cost to consumers.”

Higher diesel prices mean higher transportation costs, which inevitably get passed on to consumers through increased grocery bills. Patrick De Haan, head of petroleum analysis firm Gas Buddy, called this “a secret killer of the North American economy” if left unaddressed.

Canada’s largest refinery, the Irving Refinery in New Brunswick, is currently shut down for maintenance until November, further exacerbating supply chain issues. Meanwhile, Russia’s ban on diesel exports has had a disproportionate impact on global supplies. The federal government’s temporary suspension of the federal fuel excise tax may provide some relief, but experts warn it doesn’t go far enough.

What makes this situation particularly dire is that these rising diesel prices are occurring during a period of extraordinary supply chain stressors. Heat waves have already begun to take their toll on food production, and energy analyst Dan McTeague warns that diesel prices historically rise even more in the winter. This perfect storm of problems will only lead to endless upward pressure on food prices.

Evan Fraser at the University of Guelph’s Arrell Food Institute paints a stark picture: “We could be looking at a very expensive winter ahead… not just for trucking and transport but also for consumers.” Every part of the food supply chain – shipping, storing, producing – will feel the pinch.

As Canadians head into what promises to be an extremely challenging winter, they should brace themselves for sticker shock. With assumptions about global food production and trade now being upended by rising energy prices and geopolitics, we may be facing a new normal of elevated food prices for the next decade.

In the short term, low-income Canadians will struggle to absorb these increased costs. As experts warn of a “perfect storm” brewing, Canadians would do well to pay attention to this far more insidious threat lurking in the shadows – one that may just upend our economic assumptions for years to come.

With diesel prices showing no signs of abating, it’s only a matter of time before we see the full force of this perfect storm.