People in Nunavut are bracing for a significant hike in fuel prices.

Starting Jan. 1, the price of gas will rise 20 cents a litre, diesel will rise 10 cents a litre and jet fuel will go up 2.5 cents a litre.

Ronnie McGregor

Ronnie McGregor, who drives a taxi in Iqaluit, says the price hike could cost drivers up to $500 more a month. (Grant Linton/CBC)

Ronnie McGregor, who drives a taxi in Iqaluit, says the price hike could cost drivers up to $500 more a month.

“It definitely has an impact on the cost of operation,” he says.

In Nunavut, all fuel is purchased in bulk during the summer shipping months, then distributed by the government. In Iqaluit, gas and diesel are then distributed by private retailers, who determine the final price.

“The cost to purchase fuel has increased in world markets over the past couple years,” says Roy Green, deputy minister for community and government services. “As a result, the existing retail prices are no longer sustainable, so we need to increase the retail price to recover our operating cost.”

The Government of Nunavut says fuel prices in the territory haven’t gone up since 2008.

In the last few years, the territory was able to lower fuel prices through the Petroleum Products Stabilization fund. When Nunavut buys fuel at a reasonable price, profits are deposited into the fund to help offset future cost increases.

But the fund has run out of money.

“There is an accumulated deficit in the stabilization fund,” Green says. “Without an increase in the retail price of fuel, the PPD cannot live within the legislated limit of the stabilization fund.”

The fund cannot have an accumulated deficit of more than $10 million.

Nunavut has several fuel subsidy programs to help elders heat their homes, and to help hunters and outfitters purchase the gas they need to get out on the land.

Gas pump broken in Arviat

Meanwhile, people in Arviat will be lucky to get any gas at all.

The gas pump motor in the community stopped working on Saturday.

Richard Kellett, field operations manager with the Nunavut Petroleum Products Division, says PPD has contacted suppliers to get a pump from Montreal or Winnipeg. In the meantime, they’re working on a local solution.

“We’re trying to switch the diesel pump over to the gasoline dispenser so that we would be able to get gasoline,” Kellett says. “And for the few vehicles which take diesel, we would then deliver the diesel to them out of our delivery truck.”

Kellett says they hope to have the temporary fix working later today.

He expects the permanent replacement to be flown to Arviat within two days.