Consumer budgets strained by higher gasoline, heating and food prices

www.guelphmercury.com Monday February 23, 2003 - 12:25:08 EST CP Archive

Canadians are facing sticker shock on a slew of products, from gasoline to heating costs, bread, milk and other basic grocery items, and it could put a deep dent in their budgets. (CP Archive)TORONTO (CP) - Canadians are facing sticker shock on a slew of products, from gasoline to heating costs, bread, milk and other basic grocery items, and it could put a deep dent in their budgets.

Gas pump prices are already at 90 cents a litre in some parts of the country and the rising crude oil price to more than $35 US a barrel - related to war fears and Venezuela's general strike - has caused a spike in home heating fuel during what's been a bitterly cold winter across most of Canada.

Natural gas prices are also on the rise.

Now skyrocketing transport costs are trickling into the prices consumers pay for products such as fruits and vegetables that get shipped into and across the country. And last year's drought has put upward pressure on grain prices.

That affects livestock feed costs and flour prices, which in turn boosts the cost of bread and meat.

Car-loving Canadians traditionally gripe about the cost of gasoline, but with pump prices edging ever closer to the dreaded $1-a-litre level, there's good reason.

For some, that means the car will have to be left in park.

"I'm on a very strict budget and, because of that, I can only spend $40 a month on gas," said Dave Steeves, who works at a communications company in Toronto.

Because of rising fuel prices - adding $10 to $15 to the cost of filling up his car, "now what's going to happen is I'm not going to use the car," he said.

Last month the car sat idle for the final two weeks of the month because it had guzzled up its budgeted quota, Steeves said. That will likely happen this month too, he added, which is a frustrating situation.

As a result, Steeves is walking to get groceries and to take his two children places. And he's relying on friends to help him get to work and his hockey games.

"If I vary from (my budget), then something else won't get paid," he said, adding that although the government could shift taxes away from gasoline, it would just show up somewhere else.

As for the cost of groceries, "what else can you do but suck it up and move on?" he commented.

So far, prices on fruits and vegetables haven't gone up much, but that's expected to change if gasoline prices stay at elevated levels.

Ralph Boyd of the Atlantic Provinces Trucking Association said prices of fresh fruit and vegetables from California, Florida and the southern states will rise most quickly and most steeply, "simply because transportation is a large part of the cost of those goods."

Boyd said there's a looming crisis in Atlantic Canada because few trains come to the region and air freight is uneconomical, so trucks account for about 95 per cent of consumable goods brought into the area.

Earlier this month, gasoline prices took a hike of 12 to 13 cents a litre across New Brunswick, the largest increase in the country. It's only a matter of time before those higher bills get passed down the line.

"We can't absorb those costs. We have no choice but to pass them on to the users of our service," Boyd said.

Although grocers try to keep those price spikes from hitting the shelves immediately, it's impossible to remain in business without charging more when costs escalate, said Mike Apostolou, the manager at Sun Valley Fine Foods in Toronto.

"The companies have to raise their prices sooner or later," he said. "Some try to hold off as much as possible but it comes to a point where they say, 'We're going to go belly-up if we don't raise it.' "

In recent months the cost of milk, cream, flour, cookies, bread and related products, has risen, Apostolou said.

"The consumer is going to be spending more money to buy staple items like milk, eggs, juice, bread."

Bread prices are up about a nickel or so per loaf, although that depends on the product, said Geoff Wilson, a spokesman for grocery giant Loblaw Co. and breadmaker Weston, an affiliate company. But producers have been trying to keep costs from hitting product prices, he said.

On Friday, Maple Leaf Foods reported lower fourth-quarter profits partly because of higher feed costs for its meat operations. Meanwhile, its Canada Bread bakery division - which makes the Dempster's, Olivieri and Tenderflake brands - passed on wheat price increases to its customers.

Pete Luckett, the Cockney grocer who transformed a small fruit and vegetable operation into a popular Atlantic Canada chain, said he's trying to hold off raising prices to deal with higher transport costs.

But "if it continues to go crazy, it has to happen sometime," he said.

Although customers say higher costs haven't shown up in a major way at the market, they expect the price shock to come soon. And when fruits and vegetables get too pricey, "I just won't buy them," said Halifax shopper Lynn Brooks,

A price crunch will force her and her neighbours to make tough choices in their shopping and eating patterns, she said, by using frozen vegetables or simply not buying items when the price skyrockets.

"When lettuce went up to over $2 a head last year, I didn't buy it unless it was a treat."

The rising food bill for others has meant cutting back on other areas.

Chris Lee, a construction worker in Vancouver, said he has to eat properly, so his social life suffers when food costs soar.

"More money on food means less cash on the weekends. I stay home more," he said. "I do drive to work and, yeah, after groceries and gas there's not much left for the weekend."

Facts about recent price increases:

Energy prices: Up 7.1 per cent in December 2002, compared with December 2001, according to Statistics Canada's consumer price index. In November, the increase was 14 per cent. In December, gasoline prices rose 20.8 per cent and fuel oil prices increased 17.2 per cent.

Gasoline prices: Canada's average regular gasoline price topped 82 cents a litre last week. In 2001, the low was 55.9 cents, the high 80.4 cents. In 2002, the Canadian average ranged from a low of 56.4 cents to a high of 75.5 cents, says research by MJ Ervin & Associates.

Food prices: In December, fresh vegetable prices soared five per cent, mainly due to a big jump in the cost of tomatoes and increased demand during the holidays.

Food prices rose on average 2.6 per cent in 2002 after a 4.5 per cent increase in 2001. The increases in 2002 were due to higher costs for fresh vegetables, especially potatoes, milk products, bakery products, beef and fresh fruit, says Statistics Canada.

Grain prices: Have been rising since the middle of last year after the drought in Canada, the United States and Australia caused grain stocks to drop substantially. In 2002, wheat prices rose by 12 per cent. When prices peaked in September 2002, they were up 49 per cent year-over-year, says Kenrick Jordan, a senior economist with BMO Financial Group, who tracks agriculture product prices.

BMO forecasts that these prices will continue to rise, up about 15 per cent this year.

Dairy prices: Higher feed and fuel prices have led to an increase in the price of dairy products. The Canadian Dairy Commission increased its support prices for milk producers, a price used to determine the price of fluid milk, so their return is expected to rise by 3.9 per cent to deal with higher costs. In 2001, the support price increased and was expected to increase the dairy farmers' return by 1.7 per cent.

Here are some comments from consumers about how higher gas, heating, and food prices are affecting them:

"I don't buy many packaged foods any more, like pre-made salad or fancy biscuits. It would be nice to, but on a fixed income you have to be very careful. And I live on my own, so everything is so expensive. It's a worry, so you just buy basics, milk and bread." - Beth Doe, a widow living on a pension in the west end of Vancouver.

"Well living downtown, rent is so much higher, so I do have to cut back on my groceries quite a bit. I share costs with my roommates, but it still seems horrendous. If I didn't work in a restaurant on the weekends how would I be able to afford this bag of groceries . . . this bag cost over $30. Yikes. How did it get to be that high? One bag?" - Lisa McIntyre, a student in Vancouver.

"Heating costs, I've noticed, especially with this winter. It's been brutal. But you just have to bite the bullet and hope it ends soon." - Sonia Haynes, an account manager with an insurance firm in Toronto, who says gas prices are "ghastly" but she's fortunate that most of those costs are covered by her company as part of her job.