It hasn’t taken long for Londoners to start feeling the pinch at the pumps.
Ontarians saw gas prices spike in the New Year due to carbon pricing.
Most stations in London were charging 104.9 for regular on New Year’s Eve that rose to 116.9 Wednesday morning.
That’s 18 cents higher than what Londoners were paying for gas one month ago and 23 cents higher than what drivers were paying at this time last year.
But don’t expect the price hikes to stop there.
“I think 2017 is probably going to be more expensive than the past two to three years, and not just for gasoline but also for diesel,” gasoline analyst Dan McTeague told Global News.
WATCH ABOVE: Why Canadian gas prices are on the rise. Mike Drolet explains.
The carbon taxes are intended to reduce greenhouse gas emissions, and slow climate change. Along with the carbon pricing, an OPEC agreement to cut global production of oil will also put pressure on prices at the pump.
McTeague told AM980 the days of gas under $1 a litre are likely gone.
“Not unless oil collapses and I don’t see how that will happen this year. OPEC seems to be getting its act together, it’s encouraged Russia to cut back by 300,000 barrels, OPEC 1.2 million barrels, Mexico 150,000, so there’s a whole number of nations that are saying not only will we cut back on production to get rid of the global surplus of oil we’re going to make sure it’s verifiable.”
Russia is the world’s largest producer of oil outside of Saudi Arabia.
Fuel across the board will be rising in 2017. Diesel is going up 6.1 cents a litre this year, while home heating fuel, furnace oil, and jet fuel are also on the rise. A study by the provincial government found those who heat with natural gas or furnace oil will be paying about an average of $5 more per month.
McTeague said federal carbon changes could hike prices even more.
“The Prime Minister has proposed to ratchet it up by $10/tonne per year. Ontario’s is at $14/tonne right now, that’s 4.3 cents a litre. By January 2019 you can start to look at a two cent increase by the federal government. Ultimately the federal approach will add, if nothing should change provincially, the federal carbon tax will be over laid above the cap-and-trade and you’ll see an additional eight cents a litre added permanently.”
There are a range of vehicles on the road, from ultra-fuel efficient to gas guzzlers.
Some hybrid vehicles will consume in the neighbourhood of 5 litres per 100 kilometres. At $1 per litre, annual fuel costs sit around $1,000 if someone drives approximately 20,000 kilometres. A bump of 10 cents per litre pushes annual costs to $1,100, an annual increase of $100.
Some trucks and large SUVs consume roughly 15 litres per 100 kilometres of driving. At $1 per litre, annual fuel costs sit around $3,000 for the same 20,000 kilometres. A bump of 10 cents per litre pushes annual costs to $3,300, an annual increase of $300.
If gas prices rise by 20 cents, expect that cost to double to $200 annually for fuel efficient vehicles, and budget an additional $600 for heavy duty trucks. Of course, many vehicles will fall in between or outside this range.
Online tools can help you calculate how much fuel hikes will cost you in the long-term.
The costs of goods and services are also expected to rise due to an increase in the cost of doing business.
“When diesel goes up, so does the cost of goods and services,” said McTeague. “One would have to look at the inflationary impact this is going to have — things like groceries, things like transportation, public and personal, will be going up.”
This puts a further pinch on overall budgets, which can put a freeze on consumer spending.
When gas prices are low, people tend to put most of the money saved on fuel (80 per cent) back into the economy – things like eating out, groceries and other goods, according to data from JPMorgan Chase and Co.
McTeague suggests the average Ontario family budget will take a $350 hit this year due to the changes.
A rise in gas prices can prompt some people to instead use public transit, but that often isn’t an option for rural residents who rely on personal vehicles.
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Ontario MPP Steve Clark, representing Leeds-Grenville and deputy leader of the Ontario PC party, said his office has already received dozens of calls and emails since provincial cap-and-trade was introduced on Jan. 1.
His constituency is largely rural, with limited, if any public transit.
He said this is another slap in the face for rural families already paying some of the highest hydro prices in the country.
“Rural residents, with policies like this, are put under increased strain compared to urban residents,” said Clark.
And while public transit isn’t an option for many rural residents, neither is driving a compact, fuel-efficient vehicle.