Natural gas price hikes will fuel inflation and hit low-income Canadians the hardest

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After nearly two years of supply shortages and rising costs due to the COVID pandemic, here’s another thing that’s going up in price this winter: natural gas.

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Many Canadian natural gas distributors have already raised their rates.

FortisBC Energy Inc., British Columbia’s largest natural gas distributor, warned in September that it would raise rates from October, with most customers expecting to pay about $8 more per month.

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Enbridge Gas of Ontario said it would see bill increases of about $7 to $44 per year depending on where the typical residential customer lives.

Manitoba Hydro has said that the annual bill for a typical household will increase by about 8.7 percent, with large volume customers potentially seeing an increase of up to 19 percent.

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But the impact of pricier natural gas goes beyond bloated utility bills and will affect low-income Canadians the most, says Sohaib Shahid, director of economic innovation at Canada’s Conference Board.

Shahid says that on one hand, higher heating bills will drive up shelter costs, which is already eating up about a third of the total annual spending of Canadians in the bottom 20 percent of the income distribution. By comparison, those in the top 20 percent devote only one-fifth of their annual spending to things like rent, mortgages and utilities.

On the other hand, rising costs of natural gas and commodities also exert upward pressure on the prices of many other products.

For example, higher energy costs, another major drain on the budgets of low-income households, make food more expensive to produce, transport and store, warns Shahid.

And for manufacturers who rely on natural gas, rising energy prices could be the fifteenth cost increase after months of struggle with costly inputs and supply-chain headaches.

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“There is a lot of fatigue now among construction companies in absorbing any more input costs. So there is a great chance that any high-end increase in cost from now on is passed on to the consumers,” says Shahid.

The reasons for climbing natural gas prices will sound familiar: Supply can’t keep up with demand.

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As COVID-19 restrictions loosen again and economic activity picks up around the world, the need for natural gas has grown exponentially. At the same time, the uncertainties of the Granthshala pandemic have made producers reluctant to invest significant capital in new drilling programs, and Canada’s natural gas storage levels are at a five-year low.

It’s the same supply-demand mismatch that has affected all kinds of goods and consumer products — from agricultural staples to patio furniture to used cars — and pushed inflation to multi-year highs around the world. Is. In Canada, the annual inflation rate reached 4.1 percent in August, an 18-year record.

In the energy market, efforts to move away from coal production and the closure of nuclear power plants have also increased demand for natural gas. Also, extreme weather events associated with climate change have resulted in unusually low energy production from other sources, including renewable energy. For example, in California, a long drought has limited the state’s ability to generate electricity through hydroelectricity. Solar has also been constrained by the smoke cover from the wildfires, analysts said.

Gas prices have more than tripled this year in Europe and Asia, prompting manufacturers to curtail activities from Spain to the UK and spark an electricity crisis in China.

The situation is not so dire in Canada and the US, which have their own supplies of natural gas, but prices are still higher than they were in more than six years.

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One of the first things you can do to reduce your gas bills is to lower the temperature on the thermostat, says personal finance expert Rubina Ahmed-Haq.

She says a temperature reduction of just one degree can cut your heating costs by two percent. Ahmed-Haq calculated that he spent $2,600 in 2020 heating his home, meaning a two percent reduction would result in a savings of $52 per year.

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It helps to have a programmable or smart thermostat, which makes it easy to lower the temperature at night and when the house is empty based on your schedule. She says that even with an old-fashioned thermostat, you can make it a habit to turn down the heat before you go to bed or go outside.

Tackling any bad spots in your home will also curb your heating costs, says Ahmed-Haq. And while it may be too late in the season to upgrade your windows, closing your curtains, blinds or curtains — when you’re not at home — helps to trap more heat, she adds.

Lastly, make sure you’re not overworking your furnace.

“It can be as simple as checking your furnace once a year, making sure you’re replacing the filter during the recommended time,” she says.

—With files from the Canadian Press and Reuters

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