Gas Price Increases Cost Canadians $950 More Per Year

Consumer spending in most categories is expected to fall, with fuel consumption projected to remain stable.

April 14, 2011

VANCOUVER - Canadian motorists will pay an extra $950 ($988 U.S.) this year in gasoline costs, according to a report released earlier this week by CIBC World Markets, the Vancouver Sun reports.

CIBC said the 25 percent rise in fuel prices since September cost Canadian consumers an additional $12 billion per year in gasoline, equivalent to a tax hike of about 7 percent.

"Higher-income households are better able to absorb the increase in energy spending without much sacrifice to their non-energy spending," said Benjamin Tal, deputy chief economist for CIBC World Markets. "In other words, the extra cost is largely borne by their savings. But for low-and middle-income Canadians, the situation is very different because energy represents a much larger share of their overall spending."

Tal said current gasoline prices are nearing the levels reached during the last "oil shock" in 2008. He said while the higher fuel costs would affect the economy, it would not result in less gasoline usage ?" at least if history is a guide. Gas consumption among Canadians was relatively unchanged between July 2007 and July 2008, during which time gasoline prices rose 40 percent.

During that stretch, consumers reduced their purchases of motor vehicles, sporting goods, clothes, and personal care products. They also ate fewer meals in restaurants.

Tal said Canadians have been protected somewhat by the rising Canadian dollar, which has gained eight percent against the U.S. dollar since September.

For more on the Canadian retail market, including the future of fuels, dark and contraband tobacco and channel blurring, attend the upcoming NACS Global Forum in June. Register today!

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