Prices at Ontario pumps reached record highs in 2022, and while it has since come down as the year draws to a close, bringing much-needed relief to drivers during the holidays, one industry analyst is predicting the cost of gas to climb up again in 2023.
"Count on it," Dan McTeague, the president of Canadians for Affordable Energy, told CP24.com when asked if Ontarians could see the average price of a litre of gasoline at $2 again.
In December, gas hit a low not seen for more than a year, dropping to 133.9 cents a litre. That's an 82-cent fall from the 215.9 cents a litre recorded in June. At the time, McTeague called $2 per litre of gas a "new normal." The invasion of Ukraine by Russia earlier in 2022 was a major contributor to the rise in fuel costs. Global demand also continued to outpace supply.
McTeague says the relief at the pumps in recent weeks will be short-lived. He warned that gas prices will begin rebounding later this month.
"We had a pretty good (run) in December. The world got very nervous about rising interest rates, demand destruction, and COVID lockdowns in China. And all those played very heavily towards keeping prices in check and pushing them down," McTeague said
"Colder weather is going to put pressure on diesel, and natural gas, which in turn will put pressure on oil and ultimately on gasoline prices. And that could start to emerge by the second or third week of January."
He expects a 10-cent hike this month that would bring gas back to around $1.50 a litre. McTeague predicts two more 10-cent increases, one in March and another at the beginning of April.
By the end of April, gas prices could be back to about $1.80 a litre given that the federal carbon tax is increasing that month, as well as there will be a switchover from winter to summer blends of gasoline, he said.
And then in May and June, with more people getting back on the roads for the summer and the possibility of central banks around the world easing interest rates, McTeague said that "could set markets off," which could mean gas prices may jump to $2 a litre again.
He noted that many in the energy sectors forecast that demand for oil will go up in 2023 and "the supply isn't quite there to meet it."
McTeague added that if the Canadian dollar continues to fall, it will further contribute to the soaring prices.
"All of our commodities are priced in U.S. dollars and so it's actually hurting Canadians and adding to inflation in ways that they may not possibly imagine," McTeague said.
"It's really eroded our purchase power. So while gasoline and oil prices have gone up, our ability to shield ourselves against those higher international prices has been diminished."
Grocery prices to remain high
In addition to rising gas prices, the cost of groceries is expected to remain elevated in 2023.
In November, grocery prices climbed at a faster annual rate than the month before, rising at 11.4 per cent, according to Statistics Canada. Meanwhile, the annual rate of inflation was at 6.8 per cent.
According to Canada's Food Price Report 2023, food prices could jump between five to seven per cent this year, with meat, vegetables and dairy seeing substantial increases.
The report predicts that an average family of four will have to spend up to nearly $16,300 in 2023 on food.
The report indicates that several events continue to affect prices in Canada, including the ongoing war in Ukraine and the slumping Canadian dollar. Labour shortages in several sectors, such as crop harvesting and food processing, are also playing a part in the prices.
"We are expecting a difficult first few months of 2023," Dr. Sylvain Charlebois, the director of the Agri-Food Analytics Lab at Dalhousie University and the project lead of the report, told CTV News Toronto last week.
"This is really what's going on right now; we're seeing food prices continue to rise."
He noted that the margin between the food inflation rate and the overall inflation rate has not been this high since 2015, when it was at 3.5 per cent.
"The differential between the two rates is so significant that people are prone to be sticker shock at the grocery store," Charlebois said.
He added that consumers will be seeing sticker shockers for the next little while but said he expects to see things calm down later in the year.
"I know Canadians want to find a scapegoat. They want to blame grocers, for example. But this is a global phenomenon. I mean, a lot of other countries have higher food inflation rates," Charlebois said.
"In the grand scheme of things, Canada's not doing too badly, but I think the food industry understands that it doesn't matter what goes on in Germany or the U.K. or the United States."
The report recommended that consumers become smart shoppers by consulting flyers for discounts, creating a budget and shopping list and looking for less expensive substitutes.
- with files from The Canadian Press
