Gas Prices Will Feel The Brunt Of Falling Loonie

Canada’s falling loonie is good news for exporters but bad news for consumers, who face higher prices as the dollar loses its spending power on global markets.

That’s especially true when it comes to gas prices. Economist Philip Cross, formerly StatsCan’s chief economic analyst, crunched the numbers to see exactly what a falling dollar would do to prices at the pump. Here’s a chart of Cross’ findings, compiled by the Globe and Mail:

Cross found Canadians’ average annual gas bill of $2,394 would jump $239 with a 10-per-cent slide in the loonie (the loonie has fallen about 10 per cent in the past year). A 15-per-cent slide in the loonie would mean a $359 increase in the price of gas, while a 20-per-cent slide would raise prices by $479.

Cross recently wrote a report for the Fraser Institute arguing that Canada’s economy won’t benefit from a falling loonie as much as some analysts think.

It’s been speculated by some that Bank of Canada Governor Stephen Poloz is deliberately talking down the loonie, in the hopes of spurring Canada’s relatively lacklustre export sector.

But Cross argued this won’t work. A low dollar may have helped exports in the 1990s, but manufacturers have adapted to the high dollar and a slide in its value won’t make as much of a difference this time around, Cross wrote.

Many analysts expect the loonie to keep falling, with TD Bank forecasting an 85-cent loonie by year’s end. Some observers are more bearish on the currency, with at least one predicting a 70-cent loonie in the coming years, levels not seen in a decade.

The loonie was trading at 89.73 cents U.S. as of Wednesday morning.

Original Article
Source: huffingtonpost.ca/
Author: The Huffington Post Canada