Business

Soaring fuel prices hamper Canadians' long-awaited travel plans

After two years of lockdowns and travel restrictions, many Canadians are eager to travel. But while travellers no longer have to worry about a Covid-19 test to return home, they face a new hurdle: skyrocketing fuel costs.

This week, the average national price of gas topped $2 a litre

High prices put damper on post-pandemic travel plans

1 month ago
Duration 1:51
Just as pandemic travel restrictions have eased, people who have been waiting two years to travel are running into a new roadblock: soaring costs because of demand and fuel prices.

After two years of lockdowns and travel restrictions, many Canadians are eager to pack their bags and finally hit the road.

However, there's a hitch. While travellers no longer have to worry about a COVID-19 test to return home, they face a new hurdle: rising travel costs fuelled by increased demand and sky-high oil prices. 

"Even though the travel restrictions have been removed, a new restriction has been added, which is a financial restriction," said would-be traveller Chanakya Ramdev of Waterloo, Ont.

Ramdev hasn't seen his parents, who live in India, since 2018. In April, after Canada lifted most of its travel restrictions, he started researching flights, departing in July. However, he was put off by the price: around $2,000 for a round trip to India.

Ramdev hoped prices would drop but when he checked again in May, he said he was dismayed to discover that airfares to India had surged to around $3,000 — a price he can't afford. 

"Three thousand dollars for me is equal to five months of rent," said the 30-year-old entrepreneur, who has put his travel plans on hold. 

"It was very disappointing because my parents, who are seniors now, have been alone in India."

Chanakya Ramdev of Waterloo, Ont., said he had to put his travel plans on hold to visit his parents in India because he can't afford the current price of a plane ticket. (Craig Chivers/CBC)

It appears those cheap deals airlines offered during the height of the pandemic have disappeared. 

According to Statistics Canada, airfares are getting pricier, up more than 20 per cent in April 2022 compared to pre-pandemic April 2019. 

Over a three month period, from February to April of this year, airfares jumped by 13 per cent. 

Economist Hayley Berg blames the hikes on higher demand and soaring oil prices.

According to the U.S. Energy Information Administration, the price of U.S. Gulf Coast jet fuel in April was six times higher compared to the same month in 2020.

"We have travellers who are eager to get out there ... but fewer seats [are] available than we would typically see at this time of year. Combine that with airline costs up significantly from the increase in jet fuel prices, we're going to have fewer seats that are more expensive," said Berg with the Montreal-based travel app, Hopper. 

At this time, flights to India can be particularly costly for airlines to operate, because they must take a longer route from North America due to the closure of Russian airspace.

Not on the road again?

Road travel is typically a more budget-friendly option than flying, but not so much these days.

Gas prices have climbed upward since December. This week, the average price of gas in Canada topped $2 a litre, a record high. 

So perhaps it's no surprise that, according to a new poll, two thirds of Canadian drivers surveyed said skyrocketing gas prices will likely force them to cancel or limit their road trips this summer. 

The poll, conducted by Leger for the Tire and Rubber Association of Canada, surveyed 1,538 Canadians in April. The poll had a comparable margin of error of +/-2.5 per cent, 19 times out of 20.

Although he no longer has to worry about COVID-19 test requirements when crossing the border, Ted Hilton of Ingersoll, Ont., said he won't be visiting family in Michigan this summer due to high gas prices. (Craig Chivers/CBC)

Before the pandemic hit, Ted Hilton of Ingersoll, Ont., made the 460-kilometre drive to his cousin's home in Michigan several times a year. 

Even though he no longer has to worry about COVID-19 test requirements when crossing the border, Hilton said he can't afford to resume his visits until the price of gas comes down. 

He also plans to make fewer trips to visit family in Ontario.

"It's kind of discouraging," said Hilton, 81, who lives on a fixed income. "You depend on keeping in touch with friends and relatives … and not being able to travel and to meet up with them, it does make you feel rather isolated."

Where will prices go?

Fuel prices are surging due to limited supply at a time when there is increased demand, said Laura Lau, chief investment officer at Brompton Funds, which closely follows the energy market.

"As the economy reopens, people go back to work, they fly more for travel," she said. "[The] demand side is basically at pre-COVID levels."

Meanwhile, said Lau, supply remains constrained due to embargoes on Russian oil imports and less investment in new drilling projects. 

"There's certainly a drive for companies to use less carbon and the trend to use electric vehicles," she said. "So what we've seen is that oil and gas production has almost been a pariah."

Petroleum analyst Dan McTeague predicts that, due to increased demand, fuel prices will climb higher this summer with gas prices surging another 10 per cent.

"In Toronto, there are days this summer where gasoline will hit $2.20 a litre. Vancouver could see $2.45," said McTeague, president of Canadians for Affordable Energy.

If his predictions come true, it may be another summer where a number of Canadians choose to stay close to home — not because of fear of COVID-19, but rather, fear of a costly travel bill.

ABOUT THE AUTHOR

Sophia Harris

Business reporter

Sophia Harris covers business and consumer news. Contact: sophia.harris@cbc.ca

With files from Nojoud Al Mallees

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