Canadians living in Alberta and Ontario saw gas prices spike in the New Year due to carbon pricing.
But don’t expect the price hikes to stop there.
“I think 2017 is probably going to be more expensive than the past two to three years, and not just for gasoline but also for diesel,” gasoline analyst Dan McTeague told Global News Tuesday.
The carbon taxes are intended to reduce greenhouse gas emissions, and slow climate change. Along with the carbon pricing, an OPEC agreement to cut global production of oil will also put pressure on prices at the pump.
READ MORE: Oil prices hit 18-month high as OPEC output deal kicks in
“This is likely to send oil and gasoline prices that much higher,” said McTeague.
An increase in fuel costs will also take a bite out of the budgets of non-drivers. Here’s a look at the various ways higher fuel prices will impact Canadians.
How much rising fuel will cost drivers
There are a range of vehicles on the road, from ultra-fuel efficient to gas guzzlers.
Some hybrid vehicles will consume in the neighbourhood of 5 litres per 100 kilometres. At $1 per litre, annual fuel costs sit around $1,000 if someone drives approximately 20,000 kilometres. A bump of 10 cents per litre pushes annual costs to $1,100, an annual increase of $100.
WATCH: What will Alberta’s carbon tax cost you?
Some trucks and large SUVs consume roughly 15 litres per 100 kilometres of driving. At $1 per litre, annual fuel costs sit around $3,000 for the same 20,000 kilometres. A bump of 10 cents per litre pushes annual costs to $3,300, an annual increase of $300.
If gas prices rise by 20 cents, expect that cost to double to $200 annually for fuel efficient vehicles, and budget an additional $600 for heavy duty trucks. Of course, many vehicles will fall in between or outside this range.
Online tools can help you calculate how much fuel hikes will cost you in the long-term.
As costs rise, consumer spending likely to shrink
The costs of goods and services are also expected to rise due to an increase in the cost of doing business.
“When diesel goes up, so does the cost of goods and services,” said McTeague. “One would have to look at the inflationary impact this is going to have — things like groceries, things like transportation, public and personal, will be going up.
READ MORE: Cap and trade to cost Ontario residents, businesses $8B in first years: report
“It’s going to be a very costly year.”
This puts a further pinch on overall budgets, which can put a freeze on consumer spending.
WATCH : New Year marks the beginning of Alberta’s carbon levy
When gas prices are low, people tend to put most of the money saved on fuel (80 per cent) back into the economy — things like eating out, groceries and other goods, according to data from JPMorgan Chase and Co.
“A substantial increase in gas prices might proportionately dampen consumer spend,” the report states.
McTeague suggests the average Ontario family budget will take a $350 hit this year due to the changes.
Rural disadvantage
A rise in gas prices can prompt some people to instead use public transit, but that often isn’t an option for rural residents who rely on personal vehicles.
Ontario MPP Steve Clark, representing Leeds-Grenville and deputy leader of the Ontario PC party, said his office has already received dozens of calls and emails since provincial cap-and-trade was introduced on Jan. 1.
READ MORE: How much do you spend on tax at the pump?
His constituency is largely rural, with limited, if any public transit.
“Having a vehicle for family use is a necessity, it’s not a luxury, they need it. And this is going to put them under real strain.”
He said this is another slap in the face for rural families already paying some of the highest hydro prices in the country.
WATCH: Sticker shock jolts Ontario drivers at the gas pumps
“Rural residents, with policies like this, are put under increased strain compared to urban residents,” said Clark.
And while public transit isn’t an option for many rural residents, neither is driving a compact, fuel-efficient vehicle.
READ MORE: Alberta carbon tax kicks in: ‘It’s already here, we can’t do anything about it’
“We live in northern Alberta, we drive in six-inch ruts in our neighbourhood – we’re not going to get a Honda Civic,” Jim Finnigan told Global News in Edmonton on Jan. 1, while buying gas.
“So no, it’s not going to change anything.”
With a file from Julia Wong and Phil Heidenreich
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