Seed World

Oil Down, Gas Prices Up: Could There be Impacts on the Alberta Seed Sector?

Now that the price of oil has fallen, Albertans are paying 9 cents per litre more at the pump.

Alberta is one of the major producers and exporters of seed in Canada. However, the seed industry could face a challenge from the gas tax, which has returned at nine cents per litre. The gas tax was paused in April 2022 by former premier Jason Kenney as an affordability measure, and was extended by current premier Danielle Smith for all of 2023. The gas tax is tied to the price of oil, and has been reinstated now that the price of oil has fallen below US$80 per barrel.

Rising Input Costs

The gas tax, if it continues into spring planting, could conceivably increase the cost of inputs, such as fertilizer, pesticides and machinery, which are essential for seed production.

Transportation Increases

The gas tax could also increase the cost of transportation, which is a major component of the seed supply chain. Seed growers, conditioners, distributors and exporters rely on trucks, trains and planes to move seed across the province, the country and the world. The seed industry exported more than $640 million worth of seed to over 100 countries in 2017/2018, according to statistics. The United States was the largest importer, accounting for $403 million. However, the gas tax could make it more difficult and costly to transport seed to these markets, especially if the exchange rate is unfavourable.

Decline in Seed Demand

The gas tax could also affect the demand for seed, both domestically and internationally. The gas tax could reduce the profitability and competitiveness of the agriculture and agri-food sector, which is the main customer of the seed industry. However, the gas tax could increase the cost of production and lower the income of farmers, who may then reduce their demand for seed.

In Manitoba, on the other hand, motorists are paying 14 cents less at the pump after the provincial government paused its gas tax for six months.

Considering Alberta already enjoys some of the lowest has prices in Canada, the nine-cent gas tax will likely not be a major shock to the system for the Alberta seed sector, but starting off the new year by paying more for fuel won’t be music to anyone’s ears.