Higher gas prices were the biggest factor in Canada's inflation rate going up in January from a year earlier. If gasoline is stripped out of the numbers, Canada's inflation rate was two per cent. With gas factored in, it jumps to 2.4 per cent. (CBC)

Record fuel prices, but Canadians still buying

Gasoline prices across Canada are reaching record prices, but surprisingly this has not greatly affected sales.

Across the country prices range from a low of around $1.30 per litre to highs of around $1.60 and higher, which are record prices in most provinces.

Prices are reaching new records in Vancouver and could go even higher. Photo: Gian-Paolo Mendoza/CBC

The prices have skyrocketed as much as 20 cents per litre in the last three months,

Usually high prices would cause people to reduce usage, but that doesn’t seem to have happened at all.  Quoted by the CBC, the CEO said their sales volume has increased and as for a reduction in sales, “We’re not seeing it. We’re not seeing it at the moment”.

Higher prices and/or additional taxes have usually seen a brief reduction before people begin to resume regular driving habits.

Crude is nearing $70-barrel, but prices in Montreal are now higher than when crude was at $140/barrel

Also more people in Canada are moving away from sedans and small cars to trucks and sport utility vehicles (SUV). Vehicle sales in Canada hit a record in 2017, but passenger car sales hit their lowest in decades.

Graph showing steady increase in crude oil price- currently about $68 US. Image: http://markets.businessinsider.com

Indeed the huge Ford Motor Co. announced it will be phasing out its sedan lines, leaving only the Mustang and the Focus Active.

The reasons for the fuel price rise are the typical ones, including the oft repeated “increase in demand of summer driving”. Other reasons include a lower value of the Canadian dollar against the U.S. dollar, crude oil prices are rising, and maintenance of refineries creating temporary shortages.  Although Canada is a major producer of crude, most of that gets sent to the U.S and we buy refined products in return.

Some provinces like B.C. have tacked on additional costs at the pump in the form of new carbon taxes.

Analysts expect that prices in Canada may go even higher during the summer.

Additional information –sources

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