Diesel prices surge to historic highs, hitting consumers harder than ever

Diesel prices rose to historic levels over the past month, filtering through to all corners of the economy as shippers and consumers struggle to absorb the blow.

Retail diesel topped $2.64 per litre on average for the week ended Tuesday (Sept. 29), up 59% from right before the Iran war and 15% from November 2022, which held the price record until this year.

Supply disruptions caused by the closure of the Strait of Hormuz have shrunk energy output for seven months and counting, with the critical waterway effectively closed and many crude refineries slashing production.

Experts say elevated fuel costs mean higher price tags on items ranging from food and clothing to construction materials for months to come, with diesel demand poised to go up further as winter approaches.

The price of a round-trip haul by a semi truck between Montreal and Toronto would have cost roughly $850 on Jan. 1. Now the total would amount to $1,400, said Mike Millian, president of the Private Motor Truck Council of Canada.

"A fleet's No. 1 expense outside of wages was always fuel. Now it's probably fuel," said Millian, whose group represents about 200 companies with in-house fleets including Tim Hortons, Home Hardware and Loblaw.

"It's really dramatic. It's tough to to absorb."

Diesel powers industries ranging from agriculture to mining and manufacturing, and the bigger expenses they face are likely to show up as higher sticker prices on consumer items.

"It hurts everybody. There's not anybody this doesn't affect," said Millian.

Even if a deal to open the strait were struck tomorrow, consumers would likely wait months before prices fell.

That lag stems partly from the time needed to carry out major shifts in a creaky global supply chain, from reopening oil wells to shipping crude oil to refineries.

"It's almost like a very slow-moving train where, when you stop it, getting going again has its own challenges," said Ross Prentice, co-founder of Evotrux, an online platform connecting shippers and carriers.

Freight railway fuel surcharges for October now sit up to 73% above levels from early August, according to figures from Canadian National Railway Co. and Canadian Pacific Kansas City Ltd.

READ: Major grocers push back on fuel surcharges as independents have 'no choice' but to accept

Truckers who haul produce, clothes and pharmaceuticals across the continent to Canadian shelves tack on surcharges as well. But there is often a gap between the transport time and the date the weekly fuel charges are pegged to.

"Fuel may have jumped 10 cents since yesterday, and they're hauling it for the same amount," said Millian.

"A couple of cents a week used to be a big deal. Now it might move 10 cents from the time you get up to the time you go to bed."

The shippers and retailers who face those transport surcharges often find they have little choice but to raise prices for shoppers.

"If you're an independent grocer and you're on an overall margin of 2% and you're getting fuel surcharges from your suppliers, you're in a tough spot," said Gary Sands, a senior vice-president at the Canadian Federation of Independent Grocers, which represents about 6,900 stores.

"It becomes very difficult to not pass on those fuel surcharges."