Diesel prices driving up holiday shipping costs

It's unwelcome news for Canadians as the holidays approach: there's yet another thing driving inflation this year. 

The price of diesel is continuing its sharp climb after inventory issues in the summer and autumn, and that'll mean shipping and transport will cost consumers more. 

"If the price of diesel is extremely high -- which we are seeing right now -- our cost of living is going to increase even more," Vijay Muralidharan with R Cube Economic Consulting said. "All of the goods and services that we need are transported through trucks, which run on diesel."

It has already started. 

Canada Post just increased its domestic parcel surcharge to 37 per cent, up six points from the summer. It cites the rising rate of diesel. 

"The cost of shipping generally is continuing to increase and that's a cost that is a huge burden to small business owners," Madame Premier owner Sarah Elder-Chamanara told CTV News. "I have flat (shipping rates for customers and) 99 per cent of the time I end up subsidizing the cost of shipping."

And though it won't -- for now -- in Elder-Chamanara's store, that cost increase is largely bleeding down to consumers.

DIESEL DEMAND

After years of low demand, the commodity is once again a hot ticket item. And with fewer refineries and booming European need, inventory is low and the cost of what diesel is available is heading in one direction. 

All the holiday shopping won't help. 

"If economic activity is extremely high, diesel demand is extremely high," Muralidharan said. "The one way it might change for the positive is if demand slows, which should eventually happen due to high interest (rates)."

The Bank of Canada's recent rate hikes will lower spending and eventually affect the high prices, but the general consensus is it'll take at least half a year for that to happen. 

Muralidharan predicts Alberta could see diesel climb as high as $2.40 a litre later this winter.