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Deflation is here
May 22, 2020
4:00 pm
Bill
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Incorrect to directly correlate the change in the price of oil with the price per litre gasoline. E.g. when you pay 95 cents a litre in Ontario there's about 43 cents of taxes in that, I believe. That includes 3 fixed cents per litre taxes (about 32 cents total) amounts, then there's a 13% HST included in the total price. So a doubling of the price of oil does not cause the price per litre to double.

May 22, 2020
6:53 pm
capnukr
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Gas wouldn't go to 1.90 on $60 oil as the underlying commodity price only accounts for probably half of the overall cost, with the rest government taxes and refining and distribution costs. If oil goes back to $60, gas will go back where it was too

May 22, 2020
7:28 pm
Norman1
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These three taxes on gasoline in Ontario are a fixed amount per litre and don't change as the manufacturer's price of the gasoline changes:

  • 14.7¢/L Ontario unleaded gasoline tax
  • 10.0¢/L Federal gasoline excise tax
  • 6.6¢/L Federal carbon tax on gasoline

They and the HST on them are a significant part of the pump price of gasoline. As a result, as Bill mentioned, retail gasoline prices don't go up and down as much as crude oil prices.

May 22, 2020
7:59 pm
Loonie
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mechone said
Really you could have fooled me "Deflation" gas is 95 cents a liter in GTA oil is 30 bucks a barrel . If oil were to go back to 60 dollars a barrel ,would that mean 1.90 a liter ? Before this happened oil was at 60 and we were paying around a 1.20
Food prices have gone thru the roof , deflation fake news  

Inflation statistics for May, when they arrive, will likely reflect the higher gas pump prices that you are currently experiencing.

The current discussion of inflation/deflation statistics is about prices in April. At the beginning of April, gas pump prices went below $.70 . At the (cheap) stations I frequent in the GTA, it was running about $.85 this past week. I don't expect the April figures will be echoed for May.

It's still possible that TFSA contribution limit will go up to $6500 in 2021. However, we need to remember that TFSAs are a political creation. If a sitting government is sufficiently unhappy with how they are operating, they will change the rules that govern them.

May 22, 2020
9:38 pm
Norman1
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We should not put too much on the March and April Consumer Price Index values as they are not as accurate.

StatCan had to extrapolate the prices for services and items that were not available for purchase because of the shutdowns across Canada.

The same caution would apply until more businesses open up.

May 23, 2020
2:40 pm
savemoresaveoften
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With the covid19 situation, the traditional CPI model that says deflation is false.
The only thing that goes down in price is gasoline but look at how often one fills up when staying home for the past 2 months. Everything else especially groceries are noticeably higher.

May 23, 2020
6:43 pm
Vatox
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savemoresaveoften said
With the covid19 situation, the traditional CPI model that says deflation is false.
The only thing that goes down in price is gasoline but look at how often one fills up when staying home for the past 2 months. Everything else especially groceries are noticeably higher.  

It doesn’t matter what anyone feels or thinks about it! It’s deflation and it counts towards indexation factors. Be sure to report to the authorities that is false, and that you don’t want a negative value in the equation.

I already stated that inflation is 1.6% when excluding energy. It’s a basket of goods and perhaps, because fewer people are using gasoline and oil, energy should get a severely lowered weighting, but it is what it is. Don’t say it’s false.

They may revisit the weighting formula and change the final outcome, we will see later. Or perhaps they may just exclude energy during the shutdown.

May 25, 2020
3:19 am
Loonie
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I doubt they will change any weightings unless there are prolonged trends. Low CPI means the government has to pay less in OAS etc.
Energy usage will come back in spades when the covid crisis passes as there will be a lot of (literally) cooped up demand.

May 25, 2020
9:50 am
Vatox
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Loonie said
I doubt they will change any weightings unless there are prolonged trends. Low CPI means the government has to pay less in OAS etc.
Energy usage will come back in spades when the covid crisis passes as there will be a lot of (literally) cooped up demand.  

Agreed, the deflation, so far, is minute and will only shorten the increases for government benefits. It’s not a problem, yet.

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