Chart of the Week: Diesel drama  

Ever since gas prices (including diesel) spiked after the U.S. and Israel attacked Iran at the end of February, our concern has been that higher transportation costs will spill over into other prices (like groceries). This is what’s keeping the Bank of Canada up at night as it would need to lean against that with higher interest rates. So far, we haven’t seen this happen in a dramatic way, but some pass through is inevitable. Diesel prices, which is what most trucks transporting goods and farm equipment run on, have reached record levels in Canada and around the world.

As our Chart of the Week shows, a litre of retail diesel averaged $2.57 in September, setting an all-time high. Diesel prices tend to go up in the winter months, so even higher prices might be on the way.

The main culprit for the jump in prices this year is the supply disruption in the Middle East brought on by the war with Iran. Other factors have, however, been adding to the supply crunch, including damage to Russian refineries. Prices are so high in the U.S., President Trump has mentioned banning U.S. diesel exports.