Gas Prices Hit Record Highs in Canada
A perfect storm of adverse factors is driving an upsurge in gas pump prices, which may soon see Canadian gas stations charging prices close to a twoonie. For drivers all over North America, higher pump prices are becoming a significant pain point.
However, local gas stations are only now starting to catch up with the rest of the world, where energy prices have been skyrocketing for months. At the international level, surging oil prices and the foreign exchange rate for the Canadian dollar are pumping up pressures.
Global Fuel Prices Soar
Experts believe there’s a good chance that oil will top a $ 100 a barrel in the next few months: up 20% from current levels of around $ 85. There are also forecasts that gas prices might top two dollars a litre in some areas of Canada during 2022.
Places like Labrador and Newfoundland – which already have of the highest fuel prices – are particularly vulnerable. Meanwhile, provincial taxes continue to rise, and the Clean Fuel Standard (CFS) initiative will be implemented nationwide on December 1, 2022.
Cleaner Fuels in 2022
With its own Low Carbon Fuel Standard already in place, British Columbia is already trading emission credits at around $475. If this figure is used as a criterion by the CFS, gas prices will rise by $0.16 a litre in every other province by the end of next year.
Designed to persuade liquid fuel suppliers to lower the carbon content of the products – particularly gasoline and diesel – the CFS sets goals for reducing greenhouse gas emissions. Producers unable to meet their targets must pay compensation into a compliance fund, or may purchase credits from other oil companies offering cleaner fuels.
Bleak Outlook as Oil Prices Heat Up
After tumbling to below zero after a year of global lockdowns, crude prices have bounced back up to their highest level in seven years. As the world gradually reopened and fuel demands crept back up, energy prices followed suit.
For families (especially those with lower incomes), this could indicate a long, cold winter looming ahead. In Winnipeg, gas prices are already at near-record levels, with monthly heating bills set to rise by a scorching 10% or more.
World Leader in Fossil Fuel Financing
More than anywhere else in the developed world, Canada’s fossil fuel producers are the pampered recipients of government hand-outs. However, renewable energy draws less government support than any of the other G20 countries, particularly compared to subsidies for coal, oil, and gas.
Topping the subsidies list at close to $14 billion a year between 2018 and 2020, Canada outstrips even heavy polluters like Korea and China. In contrast, its renewables sector lagged well behind most other nations at a mere $1 billion in government grants.
Critics stress that Canada’s energy policies are still focused on the pollutive past, rather than gearing up for a cleaner future. Many countries provide around twice as much support for fossil fuels, compared to renewables. But this fossil/renewable ratio reaches an eye-watering 14.5 in Canada.
However, progress might be on the way, as recent campaigns about the elimination of fossil fuel subsidies over the next few years. Furthermore, Export Development Canada (the government’s main funding agency) has pledged to set sustainable finance targets in the course of the coming year, while slashing fossil fuel funding by 40% below 2018 levels.
Canada’s Rich Energy Matrix
Endowed with a unique mix of energy sources, Canada’s abundant fossil fuel reserves are balanced by massive hydropower capacity, as well as promising renewable options like nuclear, wind, solar, and geothermal power.
- Petroleum: with the world’s third-largest oil reserves (mainly oil sands) Canada is a leading producer of fuels (particularly diesel, gasoline, and jet) for transportation and heating, as well as feedstock for petrochemical plants that produce the plastics used in our everyday lives;
- Natural Gas: a clean replacement for coal, vast reserves in Alberta and British Columbia can meet the nation’s needs for 300 years, in addition to exporting liquefied natural gas for heating, cooking, generating electricity, and powering vehicles;
- Coal: with well over six billion tonnes of recoverable reserves (mainly in the Western provinces), this is Canada’s most abundant fossil fuel, used mainly for generating electricity and making steel, despite smoke pollution;
- Hydropower: with over 60% of its electricity generated by water, Canada ranks second only to China for hydro output, followed by Brazil and the USA. Although releasing no greenhouse gas emissions, this alternative energy source may displace communities and destroy biodiversity through massive dams;
- Nuclear: operating commercially (and safely) since the 1960s in Ontario and New Brunswick, nuclear power plants handle about 15% of Canada’s electricity demands;
- Wind: although still lagging behind the rest of the world at 6% of national demands, Canada’s installed wind power capacity is on the rise, with forecast steady growth over the coming decade.
- Solar: harnessing energy from the sun to generate electricity and heat homes, this alternative energy source accounts for only a tiny fraction (under 2%) of Canada’s energy capacity.
- Geothermal: drawing heat from deep beneath the Earth’s surface, geothermal technologies still find it hard to cope with Canada’s unforgiving winters, when heating requirements pump up energy demands, even in British Columbia and Alberta.
Pain at the Pumps
Cautiously emerging from lockdowns and building up more mileage, Canadian consumers are finally starting to feel the pinch of higher pump prices. Jumping to $1.45 a litre, this figure is higher than the August record of $1.43, far outstripping the $1.40 ceiling that remained firmly in place until 2018.
Across the board, steeper fuel prices have domino effects that extend throughout the economy. Affecting not only vehicle owners, the prices of household staples and other essentials (like medications) rise in parallel.
Being Smart, Staying Cosy
Family budgets become tightly more tightly strapped, with less wiggle room for emergencies. Debt repayments – particularly credit cards, auto loans, and mortgages – can easily fall into arrears. And as winter weather strikes, these problems can become even more severe, as home heating costs rise.
However, prudent planning can avoid many of these problems. Rather than holiday spending sprees, thrifty cocooning could pay rich dividends by spring – perhaps even a down payment on a new car with low-interest financing!