There is a strong smell of gasoline in the biggest annual increase since January 1983 in the consumer price index (CPI) observed in May. The holiday season begins with costs at the pump up nearly 50% in one year.
Inflation continued its wild climb in May, jumping 7.7% compared to May 2021, accelerating the pace after a 6.8% increase recorded in April. The acceleration is mainly due to the 12% increase in gasoline prices from April to May. Statistics Canada adds that, excluding gasoline, the CPI rose 6.3% year over year in May, compared to a 5.8% advance in April, confirming widespread price increases and delays the achievement of a strongly expected inflationary peak.
Energy prices rose 34.8% year over year in May. For gasoline, consumers paid 48% more than in May 2021. The rise in crude oil prices will also have led to a rise (by 95.1%) in the prices of heating oil and other fuels, adds the federal agency.
Travel intentions
Statistics Canada linked the rise in crude oil prices in May to supply uncertainty amid Russia’s invasion of Ukraine, but also to a rebound in demand under the effect of the continued increase in the number of trips following the easing of restrictions related to COVID-19.
Last month, the number of Canadian residents who returned from abroad by plane reached 1.1 million, an increase of more than 1 million compared to May 2021. In addition, 1.4 million Canadian residents returned from the United States by automobile, an increase of more than one million trips since May 2021.
This upward pressure exerted by travel could continue during the summer. In the June CAA-Quebec survey, it emerged that the desire to take a vacation was very strong for 67% of Quebecers. Despite record prices at the pump, 69% of holidaymakers indicate that the automobile remains the means of transport that will be used the most. This does not prevent the survey from evoking a strong comeback in air travel, “while 15% of travelers will fly to their destination, an increase of 10 points since last year”, and not far from 19% recorded in 2019.
But if the automobile remains preferred, 43% of vacationers say that the rise in the price of gasoline will have an impact on the planning of their vacation. “The main changes observed are the distance of their route, travel once at their destination or spending on food and entertainment. »
It should be noted that the enthusiasm for recreational vehicles continues to grow, with 10% of vacationers making them their main means of transportation, which is double the results before the pandemic. However, the survey does not say whether these RVs will remain immobilized longer in campgrounds.
Gasoline taxes
In the aftermath, the pressures are very strong for governments to lower their taxes on gasoline as a means of sweetening. US President Joe Biden announced Wednesday that he wants to eliminate the federal tax on the gallon of gasoline and diesel for the summer season, while urging states to reduce or withdraw their own taxes. The influential boss of the Democratic camp in the House of Representatives, Nancy Pelosi, had rejected such an idea last week, which according to her falls under the ” showbiz “, underlines a text of the Agence France-Presse, which also recalls the declarations in 2008 of Barack Obama who, against the backdrop of rising fuel prices already, qualified the tax suspension as a “gadget” measure.
Especially since the problem remains an imbalance between supply and demand, amplified by the speculative surge inflating current energy prices by at least 25%.
Added to these distortions in crude oil prices is the rise in refining margins, whose capacities outside Russia, already under pressure, are suffering the effects of the sanctions. Over the past year, the influence of the refining margin on the evolution of prices at the pump has been 1.4 times greater than that of the price of crude.
Not to mention that experience indicates that such reductions will rarely fully line consumers’ pockets. Not to mention, also, the signal that governments would send as to the seriousness of their climate commitments.