Inflation Archives - Centre for Future Work

Extending Gas Tax Holiday Won’t Fix Fossil Fuel Inflation

Jim Stanford — Wed, 02 Sep 2026 19:56:47 +0000

The federal government has announced it will extend the current holiday on the federal excise tax on gasoline and diesel fuel for another 4 months, until January 31, 2027. New research from the Centre for Future Work confirms that extension will not solve the underlying problem of oil-fueled inflation that is hurting all Canadians, not just drivers.

The tax holiday first came into effect on April 20, and was originally set to end on Labour Day. It was intended to offset some of the impact of rising oil prices (resulting from the U.S.-Israeli attacks on Iran and the closure of the Strait of Hormuz) on Canadian consumers.

While the tax holiday may be appreciated by drivers, it has not addressed the underlying inflationary shock arising from this latest global oil price shock. In fact, Canadian gasoline and diesel prices are higher now than they were before the tax holiday came into effect (and have been higher through most of the 18 weeks since it began). The full value of the tax holiday (to fuel consumers) has thus been more than offset by continued increases in the cost of petroleum products.

New national income data released last week by Statistics Canada confirms Canadian consumers are paying billions of dollars extra for petroleum products despite the cushion from the excise tax holiday. There are also signs that the price shock is spreading into other products beyond petroleum, including air travel, other transportation, and food. This raises the spectre of another spike in broader inflation, sparked by petroleum prices. Statistics Canada data also confirms the petroleum industry in Canada has received record profits as a result of the current oil price shock.

The Centre for Future Work has published a new briefing paper analyzing the latest Statistics Canada data on consumer costs, average prices, and petroleum profits. Highlights include:

There was a large increase in consumer expenses for petroleum products, despite the tax holiday. This includes $3 billion in extra consumer costs for motor vehicle fuels in just three months April through June).
There is a growing gap (called the ‘crack spread’) between prices of gasoline and diesel, and underlying prices for crude oil. This has exacerbated the impact of the oil price shock on Canadian consumers.
There are some early signs of spillover from higher petroleum prices into other prices, and hence into broader inflation – enhancing the risk of future interest rate increases.
The price shock has produced a dramatic increase in profitability for the Canadian petroleum industry, a direct result of the extra costs paid by consumers. Combined after-tax profit in the upstream and downstream sectors reached $23 billion in the second-quarter, more than double their profits in the first quarter.
But just 5% of additional profits, and 2% of additional revenues, have been reinvested by the industry in new capital spending.

The paper concludes with several policy recommendations regarding how Canada can better protect itself against repeated cycles of oil-fired inflation, affordability crises, and higher interest rates.

Please see the full briefing paper, Another Band-aid: Extending Gas Tax Holiday Won’t Fix Fossil Fuel Inflation, by Jim Stanford.

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Iran War, Soaring Prices Drive Record Oil Profits

Jim Stanford — Thu, 06 Aug 2026 20:20:42 +0000

U.S. President Donald Trump’s misguided war against Iran has caused another shock in global oil prices – the 14^th such shock in the last half-century. World oil prices rose 50% or more after the war started, and have stayed high despite Trump’s repeated promises to stop the war and reopen the Strait of Hormuz. These price increases are is driving massive increases in profits for petroleum companies around the world – including Canada.

Canada produces three times more oil than it consumes. And while Canada imports small amounts of oil to the eastern provinces, almost none of that is sourced from the Persian Gulf. Hence there is no significant impact of the war on our domestic supply volumes or costs.

Nevertheless, because of a policy choice to tie domestic oil and petroleum product prices to global benchmarks (allowing oil producers to charge Canadians world prices for their own oil, on pain of diverting supply to more lucrative foreign markets), Canadian petroleum prices have soared in tandem.

The combination of sky-high prices with stable production costs is producing a profit windfall for Canadian petroleum companies. This is confirmed by the recent release of financial reports by publicly-traded Canadian oil companies for the second quarter of 2026.

The table below summarizes after-tax earnings and other metrics for the four largest publicly-traded Canadian producers. Their combined revenues (net of royalty payments) grew almost 50% in the April-June period, compared to the year-earlier period, thanks to the effect of Trump’s war on world prices.

After-tax profits rose more dramatically, since production costs remained largely unchanged. After-tax profits at the big four more than doubled: rising 144% compared to the second quarter of 2025, reaching a combined total of $13.3 billion. That’s almost $150 million per day in after-tax profit over the three-month period.

These four companies represent only a portion of the Canadian petroleum sector. Financial results for many companies (including wholly-owned subsidiaries of foreign oil companies) are never publicly reported. However, Statistics Canada publishes helpful financial data on an industry-wide basis. That data for the second quarter of 2026 will be released later in August.

Extrapolated to apply to the broad Canadian petroleum sector (upstream and downstream), the big four’s results suggest that second-quarter industry-wide profits could reach $30 billion (up from $12.6 billion in the second quarter of 2025). Canadian oil profits for the full year could reach $100 billion. That would set a new all-time record, smashing the peak $68 billion after-tax profit the industry recorded in 2022 (when oil prices were similarly shocked following the Russian invasion of Ukraine).

What are the oil companies doing with this record profit flow? There is no robust pattern of reinvestment in new Canadian projects. In fact, excluding acquisitions of other companies and properties (which does not represent an increase in real investment), capital spending by the big four companies actually declined slightly in the second quarter (compared to the year earlier period).

Instead, their main priority is to pay out so-called “excess cash” to company owners, in the form of increased dividend payments and share buy-back programs. Companies buy back their shares as a way of boosting share prices (this benefits company executives, too, through share-based compensation systems). The four majors spent over $6 billion on share purchases and dividend payments in the second quarter, up by almost $2 billion from like period 2026.

Hopes that booming oil profits will lead to new investment and jobs in the petroleum sector are being dashed by the priority these firms are placing on cash payouts, rather than reinvestments.

But the combination of record profits and rapid share buybacks has been great for company owners. Share prices at the big four majors have increased by an average of 45% since the start of the year. Most of those gains are captured by the wealthiest minority of the population. Other Canadians experience only higher costs and declining real incomes.

Research on the distribution of global oil profits during the 2022 price spike confirms that each oil shock further redistributes income upward. Global oil profits almost doubled that year, to nearly $1 trillion (U.S.). In the U.S., 50% of those gains were received by the richest 1% of the population; the bottom 50% of the population got almost none. A less extreme, but similar, pattern prevails in Canada.

In the meantime, oil-fueled inflation remains a threat to living standards and economic performance for most Canadians – those who do not own significant equity holdings in oil companies. Inflation has increased again in Canada since the Iran war started (just as it did in 2022 after the oil shock accompanying the invasion of Ukraine).

Spillover price increases for other goods and services (whose costs of production also increase due to high petroleum prices) will amplify inflationary pressures. And if the Bank of Canada responds with higher interest rates (as it will if above-target inflation persists), Canadians will be punished further with higher interest costs, on top of sky-high gasoline prices and faster broader inflation.

The current oil price shock, just the latest in an ongoing pattern of global price volatility, confirms that fossil fuel prices are the greatest threat to affordability and living standards for Canadian workers and consumers. Please follow the Centre for Future Work’s False Profits project for more details on the impact of oil prices on prices, real wages, and inequality in Canada.

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Webinar on New Report: A Sequel We Don’t Want

Jim Stanford — Tue, 16 Jun 2026 18:35:42 +0000

The Centre for Future Work recently hosted a webinar presenting results from its new report, A Sequel We Don’t Want: What the 2026 Oil Price Shock Will Cost Canadians.

The webinar featured presentations from Jim Stanford (Centre for Future Work Director, and author of the report), Atiya Jaffar (Canada Country Manager from 350.org, sponsor of a campaign for an excess profit tax on petroleum companies), and DT Cochrane (Senior Economist at the Canadian Labour Congress).

It explains the likely effects of the new global oil price shock on Canadian consumers, inflation, and interest rates. It predicts at least $50 billion in higher direct and indirect costs for consumers (including the flow-through effects of higher oil prices on prices of other products, ranging from transportation to food to housing). It also warned of the possibility of higher interest rates and even slower economic growth.

Please view the entire one-hour webinar on the Centre’s You Tube channel.

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Oil Price Spike Causing More Trouble for Canada’s Economy

Jim Stanford — Tue, 16 Jun 2026 18:29:27 +0000

Centre for Future Work Economist and Director Jim Stanford was recently interviewed on CBC News Channel regarding the outlook for Canada’s economy. He stressed that growth has been near-zero since U.S. president Donald Trump launched his trade war through big tariffs on Canadian exports. He also explained how high oil prices resulting from Trump’s attacks on Iran and the resulting disruption in global oil supplies would affect inflation in Canada, citing findings from the Centre’s recent report on the inflationary impacts of the war.

Please see the full interview here.

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A Sequel We Don’t Want: What the 2026 Oil Price Shock Will Cost Canadians.

Jim Stanford — Mon, 18 May 2026 06:59:33 +0000

The war in the Persian Gulf has caused the biggest disruption in oil supply in world history, and is driving up costs and inflation around the world – including in Canada.

New research from the Centre for Future Work, published through the False Profits project, shows how damaging this latest oil shock will be for affordability and inflation in Canada. It also proposes policies to protect consumers and workers.

The numbers are grim: The report predicts $50 billion in additional consumer costs over a 12-month period, and inflation jumping to 4.2%, even if the conflict ended and the Strait of Hormuz reopens tomorrow.

If the Strait remains closed for longer, the impacts on consumers will be much worse. Three months of additional closure would double the hit to Canadian consumers (to $100 billion), and push Canadian inflation to 6.9%.

The study also estimates the windfall revenue gains flowing to Canada’s petroleum industry from the war. Upstream oil revenue will soar by $65 billion over 12 months, even if the Strait reopens immediately. Under a longer closure, the industry’s revenue would increase by up to $155 billion, reaching almost $400 billion in total over the 12-month period.

The report advocates measures to stabilize oil prices within Canada (since Canada produces almost three times as much oil as it consumes, and production costs at home are unaffected by the Persian Gulf conflict), redistribute record petroleum profits back to consumers, and accelerate the transition to renewable energy sources.

Please see the full report, A Sequel We Don’t Want: What the 2026 Oil Price Shock Will Cost Canadians.

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CBC Sunday Morning Feature Interview: Trump’s War and the Macroeconomic Outlook

Jim Stanford — Tue, 28 Apr 2026 18:44:37 +0000

U.S. President Donald Trump’s war against Iran has unleashed a cavalcade of global economic disruptions. Most severe is the impact of the blockage of shipping through the Straits of Hormuz on worldwide oil prices, and supply chains for other commodities (including natural gas, fertilizer, and chemicals). Even though Canada produces far more oil. Gas, and fertilizer than we use, the resulting price spike has hit us, too – as a result of our policy choice to tie domestic prices (even for our own energy) to that global roller-coaster.

In this CBC national radio interview with host Piya Chattopadhyay, Centre for Future Work Director Jim Stanford discusses the impacts of the war (on top of the disruptions from Trump’s tariff policies) on Canada’s economy, in the lead-up to the federal government’s spring fiscal update.

What the government's policy playbook might mean for your pocketbook.

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Speculation and Greed Explain the Price of Gasoline, not Supply and Demand

Jim Stanford — Thu, 23 Apr 2026 17:20:23 +0000

The economic impacts of the U.S.-Israeli war on Iran were felt by Canadians within hours of its launch. Prices for gasoline, diesel, and home heating oil (widely used in Atlantic Canada) shot up very quickly. This is both surprising and infuriating—since those products were produced, refined, and delivered long before the war started. Why do consumers have to pay more, given the war had no impact on the cost of production?

Centre for Future Work director Jim Stanford pursued this question in a commentary originally published in the Toronto Star.

Policy Choices, not Market Forces, Explain Why We’re Getting Soaked at the Pump… Again

By Jim Stanford

For beleaguered consumers, it’s déjà vu all over again. War breaks out on the other side of the world. Within 24 hours, gasoline prices take off – rising up to 50 cents a litre on average across Canada since the war started. Natural gas and heating oil prices will follow, along with costs for anything that uses petroleum intensively (like transportation services, food, and construction).

It’ll get worse when the Bank of Canada jumps into the fray with higher interest rates to counteract renewed inflation. Then the victims of oil-fired inflation will be punished again.

We’ve seen this movie before. Sadly, we haven’t learned its lessons.

In February 2022, Russia invaded Ukraine – a country that does not produce significant amounts of oil. World oil prices soared 65% in weeks, propelled unduly by speculative bets placed on financialized futures markets.

Prices subsided by the end of the year, after it became clear world oil supply was unaffected by that war (which still drags on). But the damage was done. The 2022 oil spike was the biggest single cause of the resulting inflation that caused such turmoil around the world.

In Canada, that surge in oil prices directly accounted for 43% of post-pandemic inflation, which peaked at 8% four months later. The indirect costs were even bigger: including price hikes on energy-intensive products, subsequent higher interest rates, and job losses as high rates chilled the aggregate economy. I have estimated that the cumulative toll for Canadian consumers from the 2022 oil price surge exceeded $200 billion over three years – a staggering $12,000 per household.

Now prices are soaring again, following U.S.-Israeli attacks and Iranian counter-attacks. Before banging their heads against the nearest brick wall over the prospect of a painful sequel, consumers should pause to ask two fundamental questions. Why must we pay so much more for oil and gas produced, processed, and consumed right here in Canada, with no connection to the Middle East whatsoever? And who benefits from this outcome?

The gasoline stored in pumps right now sells for much more than before the war started. But it was refined weeks ago, from oil extracted months ago. Canada produces far more oil than it consumes; three-quarters of our production is exported. Of the modest volumes imported into eastern Canada, almost none comes through the Persian Gulf.

So there’s no energy ‘supply shock’ in Canada. The cost of producing and refining gasoline hasn’t changed at all. Yet Canadian consumers are already being soaked. And the worst is yet to come.

Petroleum companies profit immensely from this gap between soaring revenues and steady costs. That produced historic petroleum profits after the Ukraine invasion – almost $1 trillion worldwide in 2022 alone. In Canada, after-tax petroleum profits (upstream and downstream) totaled $154 billion from 2022 through 2024, when the inflationary burst finally subsided. That propelled after-tax corporate profits to 21% of Canadian GDP in 2022 (the highest share in history), even as Canadians struggled with affordability.

This new war has roiled real oil supplies (not just futures markets), so the price shock will likely be worse and longer lasting. But it’s not inevitable that we should tolerate the resulting economy-wide inflation and higher interest rates here at home.

Regulation could curtail the speed and extent to which foreign shocks are reflected in domestic prices. Energy prices could be tied to the actual cost of production (like we already do with electricity). And accelerating the transition to hydro, wind, solar, and geothermal (none of which traverse the Straits of Hormuz!) would further protect us.

Of course, petroleum lobbyists complain that insulating Canadian oil prices from global chaos will cause price ‘distortions’. But it’s hard to imagine anything more distortionary than inflicting another pointless cycle of inflation followed by contraction on an entire national economy – one that is blessed with far more energy than it needs.

The oil industry’s preferred solution to everything – build more export pipelines – would clearly make affordability even worse. New LNG projects, in particular, will amplify upward pressure on domestic gas prices, something the Alberta government’s recent provincial budget explicitly celebrated.

Perhaps Canada can’t do much about interminable conflict in the Middle East. But we can certainly do more to protect our own economy from its fallout.

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New Report Shows Speculative Oil Markets Drove Inflation Crisis — And It’s Poised to Happen Again

Jim Stanford — Wed, 19 Mar 2025 23:21:41 +0000

A new report from the Centre for Future Work reveals that financial speculation in global oil markets — not supply shortages or carbon pricing — was the primary driver of Canada’s inflation surge in 2022. The report, Counting the Costs, finds that inflated oil and gas prices, passed directly and indirectly to Canadian consumers and businesses, cost each household an average of $12,000 over three years.

Furthermore, the report warns that without urgent action, this will happen again, especially as geopolitical instability — like Donald Trump’s erratic threats of tariffs — creates the conditions for another speculative oil price surge.

The report proposes three policy recommendations to prevent a similar macroeconomic shock in the future from volatile futures markets:

Insulate Canadian fossil fuel prices from the gyrations of financialized futures markets.
Strengthen royalty regimes and collect excess profits taxes when oil and gas companies profit from future price spikes, redistributed to compensate consumers for extra costs.
Accelerate energy conservation and the transition to renewable energy systems (which are not in the thrall of futures market speculation).

This report is the first publication from a new project, False Profits, hosted at the Centre for Future Work. The project will investigate how fossil fuel prices and profits have contributed to affordability challenges and economic insecurity for Canadians.

Please see the full report, Counting the Costs—Impacts of the 2022 Oil Price Shock for Canadian Consumers and Workers, by Jim Stanford and Erin Weir.

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High-Tech Price-Fixing

Jim Stanford — Mon, 02 Dec 2024 20:16:10 +0000

One worrisome feature of recent bursts of inflation has been the role of automated price-fixing technologies in pushing up prices across entire industries. Companies use special programs to search out the prices being charged by competitors, and detect changes in demand. These algorithms can then adjust prices quickly, at the level judged to be the highest the market will bear.

This process leads to faster transmission of price shocks (such as those resulting from supply chain disruptions, energy price changes, or major crises like the COVID pandemic). And with companies across a sector relying on similar technologies, it can amount to a form of automated price-fixing.

Centre for Future Work Director Jim Stanford explored this threat to competitive pricing practices in a recent commentary, originally published in the Toronto Star:

How algorithms are driving high-tech price-fixing

by Jim Stanford

It was certainly bad timing for me to arrange a business trip to Toronto on November 15, just as Taylor Swift kicks off her six-show run at the Rogers Centre.

My usual mid-range hotel room tripled in price (to $900 per night). Worse yet, prices for virtually every comparable hotel within 25 km of downtown also tripled, to around $900.

I’m not surprised hotels would exploit a spike in demand to soak customers and pad their profits. After all, that’s capitalism.

But the uniformity and universality of this price-gouging is something new. It’s almost as if all hoteliers in town got together and agreed to triple their rates while Taylor’s in town.

That would be illegal, of course. But in effect, that’s exactly what happened – thanks to new high-tech algorithms that instantly adjust prices in response to fluctuations in demand, supply, or information.

Hotels were early adopters of new strategies variously called algorithmic pricing, dynamic pricing, or surge pricing. They use big data – on everything from economic trends, special events, competitors’ prices, weather, and even individuals’ buying habits – to automatically fix prices at the highest level (in the algorithm’s judgment) that consumers can bear.

If all market participants apply algorithms that scrape the same data and apply the same AI logic, then this amounts to high-tech price-fixing. There are no secret memos or off-the-record conversations between corporate executives. As we know, such explicit evidence of collusion is hard to find (Canada’s infamous bread price scandal being a rare exception).

Now businesses leave all the dirty work up to machines. Where price-fixing is concerned, there’s an app for that. Canada’s lax competition laws, already sadly inadequate to prevent price-fixing and cartels, don’t stand a chance against ubiquitous and instantaneous algorithms.

Algorithmic pricing was pioneered in travel and airlines, where firms constantly strive to match available capacity to consumer demand, at the highest possible price. It is now commonplace in many other industries, from rental apartments to e-commerce to food manufacturing and supermarkets.

This technology can even set individualized prices, based on personal data (from past purchases, demographic characteristics, social media posts, and more) that reveals each consumer’s willingness to pay.

Platform businesses like Uber apply this strategy in two directions at once. They use algorithms to customize pay for each driver (based on the degree of desperation they revealed by accepting previous jobs), rather than using a standard formula based on time and distance travelled. And they apply mirror-image strategies to maximize the price paid by each customer (based on fluctuating supply and demand conditions, past consumer behaviour, and other data).

Drivers can’t predict what they’ll earn; consumers don’t know what they’ll pay. But Uber is sure to pocket the biggest possible slice of each transaction. Indeed, Uber’s margin on total revenues has grown substantially since it began applying algorithmic pricing.

Consumers can no longer have confidence about the “going price” for any product or service: it all depends on what the algorithms dictate on any particular day. This confusion facilitates rip-offs.

Indeed, instantaneous algorithmic coordination of prices across firms clearly amplified the inflationary pressures that arose after COVID lockdowns. Using big data and AI to quickly identify and exploit supply shortages and pent-up consumer demand, firms could hike prices faster – confident their competitors (using the same algorithms) would follow suit.

That’s why corporate profits tracked inflation so closely: profits in Canada reached their highest share of GDP ever in 2022, just as inflation peaked at 8%. Both profits and inflation have come down since.

U.S. regulators have started to respond to the challenges of algorithmic pricing. The Department of Justice and the Federal Trade Commission have launched several lawsuits against companies for algorithmic price-fixing. And the U.S. Federal Reserve acknowledges that algorithmic pricing practices worsened the outbreak of inflation in 2022.

Unfortunately, neither the Competition Bureau nor the Bank of Canada have yet come to grips with the risks to price stability and basic fairness posed by these profit-maximizing algorithms. To bring down prices now, and prevent future algorithmic-driven surges in inflation (and hence interest rates), we need our regulators to rise to this new challenge, and hold corporations to account.

They should heed Taylor Swift’s advice: “Never be so polite you forget your power.”

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Explainer Video on Corporate Power and Profit-Led Inflation

Jim Stanford — Thu, 12 Sep 2024 02:34:03 +0000

Centre for Future Work Director Jim Stanford is featured in a new 6-minute video, produced by the Broadbent Institute, discussing the role of corporate price hikes in post-pandemic inflation.

He explains how companies in certain strategic sectors (including energy, manufacturing, logistics and wholesale trade, and housing) took advantage of the disruptions and uncertainty of the pandemic to push up prices well beyond actual costs of production.

The result was the beginning of an inflationary cycle. Unfortunately, workers were victimized twice by this process: first by unduly high prices for essential goods and services, and then again by the impacts of high interest rates which were the Bank of Canada’s only response to this inflation.

The video was produced for the Broadbent Institute’s Progressive Political Economy series, and can be viewed here.

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