Canadian consumers could wind up paying $12 billion in higher fuel charges in 2011 if soaring gas prices stay in place for the rest of the year, according to a new report released Monday.
CIBC Economics, the economics arm of the Canadian Imperial Bank of Commerce, said higher pump prices for all of 2011 would translate into $950 getting sucked out of each Canadian household to feed their cars and trucks.
"No matter how you look at it, higher energy costs bite significantly into Canadian households’ pockets," said CIBC economist Benjamin Tal and author of a report on how crude oil costs would affect individual consumers.
World oil prices have already risen by more than 20 per cent since April 2010 and Canadian gasoline prices have more than followed suit, up 32 per cent since last September, CIBC estimated.
In addition, some forecasters now believe world prices will average $100 a barrel in 2011, higher than the mean for recent years.
Increased economic demand in so-called emerging economies, such as India and China, combined with a weakening American dollar, have conspired to send pump prices to levels not seen since the nose-bleed territory of mid-2008.
Three years ago, a barrel of crude oil topped out at $147 US in the summer.
Now, Canada's prices at the station are within spitting distance of where they were in 2008, Tal said.
Between October 2007 and July 2008, crude costs jumped 40 per cent.
And pump prices, which stood at $1 a litre in July 2007, hit $1.40 some 12 months later.
Interestingly, people did not cut back on their driving in response to higher prices in 2008, deciding instead just to pay more for the privilege of ploughing through the country's streets and highways, he said.
"Canadians kept driving, behaviour which could be replicated in 2011. If history is any guide, higher prices will not impact demand for gasoline in the near-term," Tal noted.
In effect, gasoline prices could be an "inelastic" good, economic parlance for a product or service for which demand does not change much in response to higher prices, Tal said.
If that's true, Canadians will pay $12 billion, or $950 for each household in higher gasoline prices, in 2011, close to a record as a percentage of home consumption, CIBC estimated.
"That’s equivalent to a seven per cent increase in the average Canadian income tax bill," Tal said.