Discussions of rising fuel costs were a highlight at a roundtable hosted by the Truro and Colchester Chamber of Commerce on Thursday. Participants agreed that rapidly rising fuel prices are challenging farmers, manufacturers, truckers and retailers. But an even bigger concern is the labor shortage, which is slowing the production of local food and goods, as well as the future growth of agriculture, trucking and manufacturing.
“Everyone is scrambling to fill orders,” said Michel Raymond, executive director of the Nova Scotia division of Canadian Manufacturers & Exporters. “Fuel costs are not the cause of this. Most businesses can’t meet the demand because they can’t find the people to work.
However, Raymond refocused on fuel: “We know that the fuel problem will persist and that it will impact revenues and make it difficult to reinvest. The elephant in the room right now is the extra cost of having Nova Scotia Power buy fuel. There are fuel adjustment mechanisms and this is something that could have a dramatic impact not only on businesses but on all Nova Scotians.
Carolyn Van Den Heuvel, executive director of the Nova Scotia Federation of Agriculture, said rising input costs, including tractor fuel, fertilizer and plastic packaging, are rising to an unpredictable level. .
“We’ve heard from farmers that they’ve delayed clearing or bringing new land into production because of fuel costs and labor shortages,” Van Den Heuvel said.. “In a recent survey, we estimated that the labor shortage we have in agriculture equals $28 million in lost sales to the Nova Scotia economy.
Laurie Jennings is the owner of the Masstown Market near Exit 12 on Highway 104. Travelers, skiers and cabin owners often stop at the Masstown Market to purchase fruits and vegetables, pastries, ice cream, plants, gifts and wine. Jennings says that despite rising gas prices, people are still driving around and “looking for a treat,” so sales at the Masstown market aren’t hurting.
“It’s been two weeks since local strawberries started and of course the price has gone up due to input costs,” Jennings said. “I spoke to Curtis Millen, a major berry grower in Great Village, and his extra costs for diesel fuel, fertilizer and pesticides are just phenomenal. The retail price is higher – $6.99 for a liter of strawberries – and the demand is also quite high. Most days we sell. But remember this time last year, at the beginning of June, we were not supposed to leave our municipalities because we were confined. So as a retailer, we have this sigh of relief from what we’ve been through for the past two years.
Jean-Paul Picard, executive director of the Atlantic Provinces Trucking Association, said the trucking industry has “never been busier.”
“Business is going well and yet 10% of the fleet is parked for lack of drivers. If you order a truck, you wait two years for it to arrive.
The biggest problem for trucking companies isn’t rising fuel prices. For decades, these costs have been borne by a fuel surcharge added to the bill when goods are delivered to a retailer. The surcharge is often passed on to the consumer through higher posted prices for food and other goods.
“Our challenge with fuel prices is to manage cash flow,” said Picard, who has led the truckers’ association for more than a dozen years. “For a small business, you fill up your trucks, it probably costs $2,000 now. Then you deliver that load to Montreal or somewhere else and you won’t get paid for that delivery for 30 to 45 days. So if you can’t afford that cost on your line of credit, it could be very, very difficult to stay afloat. A few companies have had to ask banks for extended lines of credit or delay payment for their equipment.
Supply and demand behind peak oil?
Consumers end up paying higher prices for food and goods when oil prices rise.
“We know Nova Scotians are struggling with the cost of food and having to make decisions about car payments, rent and food,” Van Den Heuvel said. “I’ve spoken to some farmers who sell directly to farmers’ markets and have told me their sales are down from last year.”
Patrick McAllister, commodities analyst at RBC Dominion Securities, said during the online virtual roundtable that the main reason we are paying record prices for any oil-dependent product is that after two years of pandemic restrictions, ” demand came back faster than suppliers could meet.” McAllister said in April 2020, at the start of the pandemic, the price of a barrel of oil was actually trading below zero or “in negative territory.”
Global supply fell by 10 million barrels per day in 2020, compared with a decline of two million barrels per day during the 2008-09 recession, McAllister said. In April 2022, two years after the shutdowns began, the price of oil skyrocketed to $115 a barrel. Thus, supply was already tight before Russia invaded Ukraine and worsened the global situation.
Most economic forecasts predict that oil prices will remain high for months, with a possible short-term easing this summer once maintenance is completed on U.S. refineries, if they don’t get screwed during hurricane season. McAllister suggests that over the next two years, refineries will likely struggle to keep up with demand as manufacturing and air travel reflect pent-up consumer demand. He predicts “for the rest of 2022, a recession is not a foregone conclusion. But the risk is higher today than it was at the start of 2022.”
McAllister said a short-lived recession wouldn’t necessarily be a bad thing to cool an overheated economy.
Jennings of Masstown Market pointed to another potential upside: if fuel and transportation costs remain high over the next six months, Nova Scotia-produced food should be cheaper to buy than transported lettuce and carrots. by truck from California. Maybe, as long as farmers can afford to produce it. And as long as people can actually find local foods stocked on store shelves and markets and don’t have to drive too far to buy them.
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