Gas prices likely to keep rising as summer travel season kicks off: economists

The pain at the pumps is likely to worsen as more Canadians hit the road this summer, potentially pushing prices on gasoline higher.

Soaring gas prices fuelled the largest rise in the annual inflation rate in four decades last month, Statistics Canada says, with economists predicting the surge isn’t done.

In May, customers paid 48 per cent more at the pump than a year earlier as a result of high crude oil prices, caused in turn by supply bottlenecks after Russia’s invasion of Ukraine and a leap in demand prompted by eased COVID-19 restrictions.

The price of gasoline jumped 12 per cent between April and May, the largest one-month price increase since January 2003, the agency said Wednesday. That surge helped propel last month’s 34.8 per cent rise in energy prices year over year.

The cost of consumer items as a whole rose 7.7 per cent last month compared with a year ago, its largest increase since January 1983 when it gained 8.2 per cent, StatCan said.

Gas prices are expected to rise another five per cent in June, projected Bank of Montreal chief economist Douglas Porter.

“In other words, we have a problem,” he said in a research note.

“While energy will shoulder much of the blame for the latest spike, it’s important to note that many measures of core inflation are now at or near five per cent, so this is well beyond a one-off move that will quickly fade even if oil prices relent.”

Service, which are driven mainly by domestic forces, are now up 5.2 per cent year over year, Porter noted as an example.