Diesel prices, carbon tax cause headaches for farmers

MarketsFarm — Crude oil prices have been steadily on the rise since last November as oil-producing nations implement production cuts and Canadian farmers already affected by climbing diesel prices will have to dig deeper into their wallets this April.

On April 1, the federal government’s carbon levy on diesel will go up from 8.05 cents per litre to 10.73 cents, a 33 per cent increase. Last December, the federal government promised $15 billion in new spending on climate initiatives until 2030, such as electric vehicle charging infrastructure, home retrofits and tax write-offs for zero-emission vehicles.

According to data from Natural Resources Canada, the average retail price for diesel on the week of Feb. 11 was $1.159 per litre including taxes, the highest seen since last March. Average prices on Friday ranged from $1.051 in Lloydminster, Alta. to $1.369 in Grand Falls, N.L.

Roger McKnight, chief petroleum analyst for En-Pro International in Oshawa, Ont., said every dollar change in crude oil prices translates to 0.6 cent at the pumps. He added that the carbon tax would make Canadian fuel less competitive on the markets.

“South of the border, they don’t have that sort of thing. It puts us at a disadvantage,” he said. “Transportation costs (along with those of) goods and services in this country will be significantly higher than they are in the United States…You’re at a disadvantage compared to an American shipping firm.”

McKnight also explained that a possible shutdown of Enbridge Inc.’s Line 5, carrying oil and natural gas from Wisconsin to Sarnia, Ont., would also raise prices even higher, but they may ease when COVID-19 vaccines reach a greater amount of the population. He predicts diesel fuel prices to increase by five to eight cents per litre over the next few months in addition to the carbon tax.

Bill Campbell, president of Manitoba-based Keystone Agricultural Producers (KAP), said the organization has followed diesel fuel prices closely. Farmers in Manitoba, Saskatchewan and Ontario are exempt from paying the carbon tax for fuel used on farm equipment and vehicles not licensed for public roads, but it still has a downward effect on farmers’ revenues.

“When we see an increase of that carbon tax, businesses will probably increase their costs and what they charge people,” he said, adding that the tax is also paid to transport crops to market.

KAP had been in talks with the federal government with regards to new programs for farmers funded by the carbon tax, but Campbell said there has been “no clarity” from the government as to whether revenues from the tax generated through agriculture will be returned to agriculture.

“We want to be recognized for the good that we do with regards to storing carbon in the soil and in our products… We are also asking for an exemption on grain drying and the heating and cooling of livestock barns,” he said.

“We have adapted (to the tax) pretty good, but to be hit with an additional carbon tax for the production of food needs to be really looked at and clarified to ensure Canada has food security and economic sustainability. We need to address what agriculture provides to this country.”

— Adam Peleshaty reports for MarketsFarm from Stonewall, Man.