Canadian consumers have heard time and time again about the rising cost of living in Canada. Costs have skyrocketed over the last 5 years, with inflation reaching an all-time high of 8% in 2022. For Canadians, cost of living remains one of the most important issues in the upcoming federal election. Many blame the crisis on rising prices for essentials, such as groceries and runaway housing costs. The increase in cost of living has been a major contributor to financial stress felt by Canadians in the past few years, and recent analysis has revealed that these costs are belied by a sneakier culprit than mere price gouging and inflation.
43% of Inflation in Cost of Living is about Oil and Gas
Economist Jim Stanford from the Center for Future Work in Vancouver examined the primary cause of inflation over the COVID years. From January 2021 to June 2022, shifts in oil and gas prices were found to be responsible for 43% of all consumer price inflation, costing Canadian households an average of $12,000 over 3 years – a figure which continues to grow.
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This report, Counting the Costs—Impacts of the 2022 Oil Price Shock for Canadian Consumers and Workers, by Jim Stanford and Erin Weir, is yet another damning piece of evidence on the urgency of the climate crisis, demonstrating again the imperative need for the Canadian government to divest from fossil fuels and focus on building renewable energy infrastructure for the environmental and financial benefit of its citizens.
How Fossil Fuel Speculation Increases Canadians’ Cost of Living
In an illuminating talk, Jim Stanford illustrated that this rise in fuel prices, while typically attributed to the Russian invasion of Ukraine and subsequent expected oil shortage, was actually caused by speculation on oil futures. Over the period between 2021-2022, fuel prices rose a staggering 81%. However, the amount of available product in the global oil supply did not change. In fact, more oil was produced than ever, with Canada producing a record amount of oil during the pandemic. Yet, speculation during this period resulted in a dramatic spike in prices; each physical barrel of oil was traded up to 13 times on paper before it was actually sold and delivered, driving the price up. Canadian oil prices, being largely de-regulated, are driven by the speculation in the world futures market. Consequently, the price of energy in Canada is largely divorced from true supply and demand, meaning Canadians are paying unnecessarily high fees for a life based on oil and gas.
The instability of oil and gas prices is felt by Canadians in four key ways. First, an increase in gas prices results in higher direct costs, such as fueling your car and heating your home. Second, indirect business expenses—such as transportation and operations costs in offices, stores, and buildings—are passed onto the customer, resulting in increased prices for products. Third, in an attempt to combat the inflation caused by increased oil and gas prices, the Bank of Canada introduced higher interest rates for loans meaning Canadians are paying more on their cars and mortgages. Finally, at the same time that prices were rising for households and businesses, unemployment increased in Canada, meaning more Canadians are feeling the harsh effects of these increased costs. Altogether, speculation on oil and gas is directly responsible for a whopping 43% of consumer price inflation, costing Canadians a total of $200 billion between 2022 and 2024. Yet, the Canadian government is slow to move away from fossil fuels, with the Conservative party proposing to give even more economic power to oil and gas should they win the election.
It’s Time to Divest from Fossil Fuels and Invest in Renewables
The cost of renewable energy has long been used to push back on fossil fuel divestment. Fossil fuel companies’ attempts to spread climate disinformation via anti-science campaigns are well-documented and numerous.
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In the first of a series of special reports, Re.Climate examines the narrative of “affordability” for the energy transition and the importance of messaging on Canadian’s support for efforts to mitigate climate change. This report suggests that many people find climate mitigation tactics (such as installing a heat pump or driving an electric vehicle) financially out of reach, but would employ these tactics if they could. The report suggests that Canadians are further concerned about the fairness of distributing costs and impacts from the green transition, with some respondents indicating that they thought climate mitigation strategies could have a greater impact on lower-income households.
Yet, research has shown that a shift to green energy will decrease energy costs (and therefore cost of living) for everyday Canadians. This is in direct contrast to the clear unfairness of basing Canadian’s cost of basic necessities like food and shelter on speculation. Re.Climate’s report further suggests that while class and political leaning are important factors in whether Canadians support the green transition, the most important factor is whether citizens receive accurate messaging with a focus on agency, efficacy, and fairness on how a shift away from fossil fuels will benefit all households and address real concerns like affording groceries and heating their home.
This report makes it abundantly clear that not only is a transition to renewables the best decision for the planet, it is also economically necessary to avoid the continued theft from Canadian’s pockets by the fossil fuel industry. Canadians have spoken out time and time again how increased groceries, energy, and home prices continue to hurt us. If Canadian politicians want to seriously address the cost of living crisis for their Canadian constituents, a divestment from fossil fuels must be on their list of priorities.
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This post was written by Canadian SRTI rebels Reneé and Lane, with some help from Suzanne and Michelle.
