High gasoline costs like ‘tax hike’ as Canada-U.S. price gap swells
The toll of the pump
The high cost of gasoline is rippling through the Canadian economy.
The gap between Canadian and U.S. pump prices has swelled to what National Bank of Canada says is now a record, with elevated costs diverting consumer spending.
The higher-than-normal seasonal increases “acted as a tax hike in Q1, leaving less cash for households to spend on other items,” said National Bank senior economist Krishen Rangasamy.
“Note that the gasoline share in total retail spending was close to record highs in the first quarter, in sharp contrast to the declining share seen south of the border,” he added in a research note today.
SPONSORED CONTENT Recharge your phone in 30 seconds? It could come sooner than you think
“In fact … the gap between Canada and the U.S. was the largest ever in Q1.”
Senior economist Sal Guatieri of BMO Nesbitt Burns puts that gap, in U.S.-dollar terms, at about 30 per cent.
“Although U.S. gasoline prices have risen 10 per cent this year, they remain within the relatively narrow band established in the past three years,” Mr. Guatieri said earlier this week.
“Canadian drivers haven’t been as lucky of late, no thanks to a weaker loonie,” he added.
Overall consumer spending was “soft” in the first quarter of the year, said Mr. Rangasamy. That’s partly because of a jobs market that has been “far from stellar,” but also because of high gas prices.
One of the reasons for that fat price gap is that eastern Canadian refineries import pricier Brent oil, compared to the U.S. Western Texas Intermediary.
Ouch: You know gasoline is soaring when it takes 18 seconds to pump $20.60
Gasoline prices spike before long weekend
Sales slip
Canadian consumers indeed pulled in their horns in March, putting the retail sector on hold as the first quarter ended.
Retail sales inched down 0.1 per cent across the country, Statistics Canada said today, largely because of declines at car dealerships and clothing stores.
Gas stations and food outlets posted gains, however.
In straight volume terms, sales slipped by 0.2 per cent, falling in seven of the sectors measures, or 59 per cent of across all of them.
The March decline put a stop to the overall increases seen in January and February.
“Note that both building material sales (-0.4 per cent) and clothing (-1.4 per cent) were down significantly, suggesting cooler-than-normal weather in March may have played a role,” said Nick Exarhos of CIBC World Markets.
High gasoline costs like ‘tax hike’ as Canada-U.S. price gap swells - The Globe and Mail
