TORONTO — A CIBC report says Canadian households are on track to spend an additional $12 billion on energy this year, as gasoline prices approach 2008 record highs.
That works out to about $950 per household in extra energy spending in 2011, if current trends persist.
Crude oil prices have risen in recent months due to political uncertainty in North Africa and the Persian Gulf region, including in Libya, Egypt and Yemen.
Although there hasn’t been a significant drop in the amount of oil available to the global market, crude prices have risen on fear there could be a serious disruption if regimes in other oil countries are affected.
The price of a benchmark oil actually fell on Monday, dropping $2.87 to settle at US$109.92 per barrel on the New York Mercantile Exchange, amid reports of diplomatic efforts to broker an agreement with Libyan leader Moammar Gadhafi.
The price of gasoline in Canada, however, stayed high — about three cents per litre more than last week, six cents a litre more than one month ago and 23 cents per litre above the price in April 2010, according to Gasbuddy.com.
CIBC economist Benjamin Tal says there won’t be much change in gasoline consumption in the short term, judging from past experience.
Instead, he thinks the most apparent up-front impact will be a switch in eating habits for people who feel financially squeezed.
Tal says people will tend to eat out less often and be more careful to buy grocery items that are on special, to cope with the additional money diverted to energy.
Lower- and middle-income families will feel the biggest impact because energy is a bigger chunk of their total spending, he wrote. The impact on high-earners will be more in terms of reduced savings than less spending in the short term.
“That suggests that high-end retailers will bode better in this environment compared to low-end retailers that service low- to medium-income households,” Tal wrote.
Certain retail sectors will also be affected more than others, he added, noting the most vulnerable include autos and auto parts, and less-essential goods such as sporting goods, clothing and personal care.
“Perhaps the most important composition effect will be seen within the food category. There is clear evidence that higher gasoline prices lead to reallocation of expenditures across and within food-consumption categories,” Tal wrote.
“With gasoline expenditures rising, consumers substitute food-away-from-home (remote locations) towards groceries. And within the grocery stores, consumers substitute away from regular shelf-price products towards promotional items.”
On average, Tal said it is estimated that the 25 per cent increase in gas prices will cut the net price paid per grocery item by two per cent to three per cent, according to American data.