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Gasoline prices spike before long weekend

These are stories Report on Business is following Thursday, April 17, 2014.

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Pain at the pump
Just in time for the long weekend comes a spike in the price of gasoline. Again.

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Prices vary across Canada, of course, from less than $1.20 a litre in Edmonton yesterday to about $1.50 or more in Montreal. Or, according to reports, an average of almost $1.22 in Alberta to about $1.47 in Quebec.

In Toronto, where I live and thus where I have to pay for gas, pump prices spiked overnight to $1.399.

But – ha! – I filled up last night and paid about a penny less. (That was luck, of course, not smarts.)

"It is costing a lot more to drive to the in-laws for dinner these days as gasoline pump prices are flirting with record highs," senior economist Jennifer Lee of BMO Nesbitt Burns said late yesterday, before the increase.

"The higher costs are caused by a number of factors, namely typical seasonal pressures, a weaker CAD, and higher crude oil prices (which are partly due to the harsh winter," she added, referring to the Canadian dollar by its symbol.

Playing into the oil market, too, is the escalating trouble in Ukraine.

Gas prices in Canada rose 3 per cent last month, and have been on the rise for several days now.

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And, according to some economists, they may climb further still.

Just yesterday, the Bank of Canada warned of rising fuel costs, in a discussion of inflation in its monetary policy report.

"In particular, energy prices are expected to increase noticeable, owing not only to higher gasoline prices but also to a sharp rise in natural gas prices," the central bank said.

A report on inflation today from Statistics Canada shows gas prices are now up 1.4 per cent from a year ago, and energy prices, over all, up 4.6 per cent.

That was the prime suspect behind a speed-up in Canada's annual inflation rate to 1.5 per cent in March from 1.1 per cent a month earlier, the federal agency said.

And while we're at it, natural gas prices spiked almost 18 per cent, largely because of higher costs in Alberta.

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Prices for electricity also increased, by 5 per cent, and for fuel oil, by 9.1 per cent.

On a month-over-month basis, and seasonally adjusted, consumer prices increased 0.2 per cent last month.

The pace of increase in prices picked up in several areas from a year earlier, including food, shelter, transportation and – wait for it – most notably alcohol and tobacco.

Clothing and footwear costs, meanwhile, declined at a faster rate.

So-called core prices, which strip out volatile items and help guide the Bank of Canada, rose 0.1 per cent on a monthly basis and 1.3 per cent annually.

"Looking ahead, gasoline and nat-gas prices are likely to put further pressure on the headline rate in April, but it will be a somewhat slower climb to get core prices to 2 per cent," said chief economist Avery Shenfeld of CIBC World Markets.

The Bank of Canada targets an overall annual inflation rate of 2 per cent.

There's an issue here, of course, for the central bank, which yesterday noted that prices are rising, though it expects that to be temporary.

"True, the impact of higher energy prices (and even food prices, which the BoC didn't mention yesterday) will eventually subside," said senior economist Krishen Rangasamy of National Bank Financial.

"But there's a limit to how long the central bank can ignore rising prices excluding 'temporary factors,'" he added.

"Indeed, excluding food and energy, the 3-month annualized rate of the CPI was running at 2.4% in March. Perhaps, underlying inflation is heating up because the economy is getting closer to potential after a strong second half last year. If the trend persists over the coming months, the central bank will probably have to turn less dovish."

Goldman profit slips
Shares of Goldman Sachs Group Inc. shares climbed today after the Wall Street giant's lower first-quarter profit still topped the estimates of analysts.

Its profit fell to $2.03-billion (U.S.), or $4.02, in the first three months of the year, from $2.26-billion or $4.29 a year earlier.

Revenue slipped to $9.3-billion.

"We are generally pleased with our performance for the quarter given the operating environment," said chief executive Lloyd Blankfein.

"Investment banking and investment management generated solid results, while market sentiment shifted throughout the quarter, constraining client activity in various parts of our franchise."

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