OTTAWA — Canadians already struggling with rising grocery prices are staring down another blow as delivery companies are hitting their retail customers with new fuel surcharges triggered by the war in Iran.
Documents obtained by National Post show that a number of Canadian trucking and delivery companies have in recent weeks used a range of mechanisms and formulas to pass on increased fuel costs to their customers. Those mechanisms include flat price increases, surcharges based on weight and distance, and new minimum orders, but economists say they’re all going to mean the same thing for consumers: higher prices.
There’s little doubt that those customers, mostly grocery stores and other businesses that rely on large shipments of goods, are almost certainly passing on those various fuel surcharges to shoppers, economists say.
Michael von Massow, a food agriculture economist at the University of Guelph, said the new fuel surcharges are likely to be felt in checkout lines with little delay, particularly in a case like today’s oil supply chain woes that aren’t expected to go away any time soon. It’s difficult to quantify how much the fuel surcharges would cause grocery prices to rise, but the charges themselves are widespread, von Massow said.
“Almost everyone is charging them.”
But the problems for consumers may not end there. Those retail price increases will then push up inflation, which has already been on the rise in recent months, putting further pressure on the Bank of Canada to raise interest rates.
Statistics Canada reported Tuesday that inflation jumped to 2.8 per cent in April, the highest rate since May 2024. That April rate compared to an inflation rate of 2.4 per cent in March.
Von Massow said higher fuel prices will also put upward pressure on prices in many industries other than groceries because transportation is an important input for most goods. Airline tickets, parcel delivery and even some public transit costs have also already been affected.
“Fuel prices are connected to almost everything in the economy,” he said.
Many of the Canadian delivery and trucking companies that are raising or implementing surcharges emphasize that the price increases are temporary and are a direct result of the war in Iran and the related price hikes in global energy markets.
CTS Food Brokers Ottawa, a food importer, wholesaler and distributor whose customers include more than 600 independent supermarkets in Ontario and Quebec, wrote to customers to let them know about a new fuel surcharge. “This surcharge will be reviewed regularly and adjusted or removed as fuel prices stabilize,” the company wrote in early April.
In its letter to customers, Brandt Meats, also based in Mississauga, Ont., said it would take a different tack. The manufacturer, whose partners include retail brands such as International Cheeses and Summer Fresh, said that its minimum order for deliveries would rise to $1,000 on May 4.
In a letter to customers, Maple Leaf Foods said it would start charging a temporary fuel surcharge of 11 cents per kilogram for all prepared meats and fresh poultry shipments.
In its March 31 letter to customers, the Mississauga, Ont.-based company said the new surcharge reflects only the incremental increase in freight costs caused by the war in Iran and that the surcharge would be reviewed each week to reflect fuel prices.
Maple Leaf, one of the country’s largest food companies, said the freight carriers association’s published fuel surcharge was 55.3 per cent higher in the early weeks after the start of the war, compared to a year earlier.
“This is not a permanent price increase,” the company’s letter to customers said, “but rather a temporary adjustment tied directly to fuel cost movements.”
Maple Leaf, which owns brands such as Schneiders, and Lightlife, also emphasized to customers that the new surcharge would not be used to recover other recent input price increases, such as raw materials, packaging or ingredients.
None of the three companies could be reached for comment on Wednesday.
For consumers, economists say, the fuel surcharges represent the second part of a double hit: they pay for the oil price surge while filling up at the pump, then again when they make purchases at the many stores affected by higher delivery charges.
While prices for fuel and many other items are noticeably higher than before the pandemic, this recent surge can be directly connected to the war in Iran that started in late February. After the United States and Israel started bombing, Iran eventually responded by closing the Strait of Hormuz, which has led to supply chain disruptions and related energy price increases.
StatsCan said this week that the price of gas jumped 28.6 per cent in April compared with a year earlier. The increase would have been even greater if not for the federal government’s move last month to temporarily suspend the fuel excise tax. That lifting of the tax, which cuts about 10 cents off the price of a litre of gas, is scheduled to expire on Labour Day.
In this week’s inflation numbers from StatsCan, there was a small decrease in produce prices, despite the new fuel surcharges. But von Massow said that’s largely because the warmer months mean that Canadian shelves are being filled by produce that tends to be grown much closer than the fruits and vegetables that are shipped north during the winter months. So, the fuel surcharges have meant that many prices have fallen less than they otherwise would have, he said.
Transportation costs represent an average of 10 to 15 per cent of the cost of non-manufactured food items during the winter months in Canada, von Massow said, but more often seven to eight per cent during the warmer months when more produce is harvested closer by.
National Post
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