A new report makes the case that the post-pandemic shock to energy prices is contributing to sticky inflation in Canada, as elevated gasoline and trucking costs trickle down from businesses to consumers.

Alberta Central Chief Economist Charles St-Arnaud published research this week that looked at economic effects from the 2021 to 2022 surge in oil prices, which he described as “the fastest and sharpest surge in gasoline prices in recent history” with a bigger inflationary impact than the oil shocks of the 1970s.

While gas prices have dropped since last year, they are still 30 per cent higher than pre-pandemic levels, the report said, “leading to important spillovers to other prices in the economy” – notably in transportation, with trucking freight costs “about 25 per cent higher.”

St-Arnaud told BNN Bloomberg on Wednesday that this has a major impact on prices of other goods and services in Canada because the country’s vast geography means businesses must for pay for transportation across long distances.

“In a country like Canada where everything is transported by truck or by train, having those costs higher increases the cost of other things and spills over into goods,” he said in a television interview.

“That eats up profit margins and at some point needs to be passed to consumers, so there could be some of that lingering energy impact still affecting inflation.”

Consumers feel the impact of passed-down gasoline prices in higher prices for food, the report said, “from food that needs to be hauled from Mexico to imported goods that arrive on the west coast and need to be shipped thousands of kilometres to consumers in middle Canada.”

Services may also be affected by the phenomenon due to higher natural gas and electricity prices for businesses.

The research comes after the Bank of Canada unexpectedly resumed its interest rate hiking cycle this month in the face of strong economic data and sticky inflation, which has come down significantly since the tightening policy began last year but still remains above the central bank’s two per cent target.

St-Arnaud’s report suggested that energy prices could be one of the reasons why consumer prices have stayed high, and raised concern that a second round of effects from the energy shock could keep inflation elevated even as other factors like supply chain disruptions are normalizing.

“The continued impact of the sharp rise in energy prices could explain, in part, the stickier inflation than initially expected,” the report said. “Such an outcome would require further monetary tightening by the Bank of Canada.”