Canada gas prices and inflation

by Maj (ret'd) CORNELIU E. CHISU, CD, PMSC, FEC, CET, P. Eng. Former Member of Parliament Pickering-Scarborough East As we celebrated the 155th anniversary of the country still called Canada a lot of new, increasingly worrying trends are occurring in our country, led by a liberal government seemingly unaware or unconcerned about the meltdown of our economy. Soaring gas prices pushed the annual inflation rate in May to its highest level in nearly 40 years, as the rising cost of living increasingly squeezed Canadian household budgets and bolstered trepidations that the Bank of Canada will opt for a supersized interest rate hike soon. Credible sources say that the next interest rate hike, which is scheduled to take place on July 13, will involve an increase of 75 basis points. By the Fall, however, it should be clear whether or not the central bank's interest rate hikes have the desired effect on reducing inflation. If the annual inflation rate remains elevated, the bank will likely reconsider its target interest rate of between two and three per cent, and could aim for more aggressive interest rate hikes in the future. If interest rates increase quickly enough, they could very well result in an engineered recession. Statistics Canada reported last week that its consumer price index in May rose 7.7 per cent compared with a year ago, the fastest pace since January 1983 when it gained 8.2 per cent. That's up almost a percentage point from April's 6.8 per cent gain. The May reading came as energy prices rose 34.8 per cent compared with a year ago with gasoline prices up 48.0 per cent compared with a year ago. Excluding gasoline, the annual inflation rate in May rose to 6.3 per cent compared with 5.8 per cent in April. In the face of this staggeringly concerning data, the question is what the government is going to do to proactively deal with the galloping recession coming into full view. With the Prime Minister touring Europe on various summits and handing out tax payers' money left and right for causes far from the everyday worries of Canadians, for the moment it seems that the governing elite do not care about this very real threat. Bank of Canada senior deputy governor Carolyn Rogers said last week that inflation is hurting Canadians and making things unaffordable. "We know inflation is keeping Canadians up at night, it's keeping us up at night, and we will not rest easy until we get it back to target," Rogers said at an event in Toronto. "We've been clear all along, the economy's in excess demand, inflation's too high, rates need to go up." Once again, an official is blatantly stating that interest rates must go high, not even considering that high interest rates are an equally big worry in the lives of everyday Canadians. It must be nice to live in the Ottawa bubble. In May, Statistics Canada said the price for food bought at stores rose 9.7 per cent compared with a year ago, matching the April increase, as the cost of nearly everything in the grocery cart increased by leaps and bounds. The cost of edible fats and oils gained 30.0 per cent compared with a year ago, its largest increase on record, mainly driven by the increased prices of cooking oils. Fresh vegetable prices rose 10.3 per cent. The cost of services in May also rose 5.2 per cent compared with a year ago, up from a gain of 4.6 per cent in April, as Canadians travelled and ate in restaurants more often. Prices for traveler accommodation gained 40.2 per cent compared with a year ago, while the price of food purchased from restaurants gained 6.8 per cent. It is clear by now that the energy crisis will be a major factor in increasing inflation on a worldwide scale, especially effecting the economies of countries who rely heavily on fossil fuels, but lack their own energy resources. So what does that say about the resource management of our country? Canada is a country rich in energy resources such as gas and oil, yet still imports oil from Saudi Arabia. One has to wonder why in a country like Canada, the population has to contend with such high prices at the pump. The answer is that we lack pipelines, have a narrow minded policy perpetuated by a government that wastes taxpayers' money on futuristic, pipe-dream projects. Justifications given in an attempt to explain high prices at the pump and inflation abound, especially those blaming everything that goes wrong on the war in Ukraine. But let's be clear. We need a real plan for helping our citizens face the upcoming economic challenge, and we need it soon. Is our government ready to face and cope with this challenge? I will let you to decide.