Diesel spike could make winter groceries pricier

Canadians face higher grocery bills this winter as a steep jump in diesel prices works its way through the food supply chain, according to economists and food researchers interviewed by The Canadian Press on Oct. 9. Statistics Canada data show diesel prices were up 75 per cent from a year earlier in August, and analysts say the cost of moving food is the next shoe to drop.

Grocery inflation was 2.8 per cent in August, below the 3 per cent headline rate for the first time in more than two years, according to the CP report. That is the good news. The question for shoppers is how long it lasts, because the diesel increase has not yet fully reached store shelves.

A Dalhousie University report found a traditional Thanksgiving turkey dinner will cost 10 per cent more in 2026, largely because of poultry and diesel prices. CP reported that food experts blame the war in Iran and the closure of the Strait of Hormuz for the fuel spike.

Money.ca reported on Sept. 22 that diesel had crossed $2.75 a litre nationally, about 80 per cent above the roughly $1.50 a litre drivers paid a year earlier. The 75 per cent figure is Statistics Canada’s August year-over-year change as cited by CP, while the 80 per cent figure is Money.ca’s comparison of pump prices.

Mike von Massow, a food economist at the University of Guelph, said prices rise across the board as diesel costs go up. Fresh produce and refrigerated goods are the most exposed to transportation costs, he said, and the cushion from the summer harvest fades as imports take over in winter.

Sylvain Charlebois, senior director of Dalhousie University’s Agri-Food Analytics Lab, has put numbers on the risk. If elevated diesel prices persist through winter, grocery inflation could run 0.5 to 0.7 percentage points higher than it otherwise would, with a central estimate near 0.6 points, according to the lab’s scenarios cited by Money.ca. A shorter spike would add roughly 0.3 to 0.4 points. Charlebois describes those as scenarios, not forecasts.

Timing is the main disagreement. Money.ca quoted Charlebois as saying diesel increases have historically shown up in grocery inflation after about nine months. In a Sept. 26 interview with 980 CJME in Regina, he said the effect could reach retail inflation within four to eight weeks, and that trucking firms are already adding fuel surcharges.

Michael Mulvey, an economist at the University of Ottawa, told CP that retailers resist raising prices for as long as they can, and that prices often lag costs, partly because transportation contracts are set months in advance.

Randall Bartlett of Desjardins said earlier relief, including a stronger Canadian dollar early in the year and the removal of counter-tariffs in September 2025, is fading. A weaker loonie and new retaliatory tariffs on some agricultural goods could push food inflation higher, he said.

The pressure is not evenly shared. Amar Singh of the research firm Kantar said shoppers are already cutting back, trading down and skipping pricier winter produce, and that lower-income households are hit hardest because wages have not kept pace with prices. Grocery prices in August were 29 per cent higher than five years earlier, with beef and coffee among the biggest increases, according to CP.

Farmers are feeling the fuel costs first. Keith Currie, leader of the Canadian Federation of Agriculture, told Money.ca that growers either buy the fuel or they do not have a crop. Bruce Burrows of Grain Growers of Canada has called for a targeted, temporary per-litre diesel rebate for farmers during harvest. Money.ca reported that Ottawa has extended its 4-cent-a-litre diesel excise tax suspension through Jan. 31, 2027.

The Bank of Canada’s second-quarter consumer expectations survey found widespread concern about higher prices, CP reported, and Canadians who expect war-related inflation were more likely to say they would cut spending. For younger Canadians renting and buying groceries on tight budgets, that makes the next few Statistics Canada inflation releases worth watching, particularly the grocery line.

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Developing: figures are as reported by the outlets named and may change as new Statistics Canada data are released. Via The Canadian Press (BNN Bloomberg), with additional reporting from Money.ca and 980 CJME.