High fuel prices driving up shipping costs for northern grocers

Now, as another bout of food inflation looms due to high oil and gas prices, grocers in the north aren’t just facing price hikes from suppliers, but also the skyrocketing fuel costs needed to ship them up north.

“The vast majority of all the perishable food is coming in by air freight,” said Nicholas Li, an economics professor at the Toronto Metropolitan University. That’s a “substantial share” of food prices, he said.

Air freight costs are usually measured by weight, Li explained. That disproportionately affects food relatively low in price for its weight, such as fruits, vegetables and milk.

Last year, the average cost of the food basket comprising 24 items at a Nunavut grocery store was $198.75, compared with the same basket of items in Ottawa at $132.44, according to a food survey report by the Nunavut government.

Jet fuel prices have roughly doubled since Iran blocked tanker traffic through the narrow waterway of the Strait of Hormuz. The route has been virtually cut off after the U.S. and Israel began their attacks on Iran in late February. As the fate of the strait remains contested amid negotiations, oil prices have continued their upward trajectory, which drives gas and diesel prices higher as well.

The North West Co., which runs retail banners including Giant Tiger, North Mart and Northern, is seeing fuel surcharges of 20 to 50 cents per pound on air freight for cargo going to northern provinces and territories.

That quickly adds up, said Mike Beaulieu, vice-president of Canadian store operations.

A four-litre jug of milk weighs 10 pounds, which means a two-to-five dollar cost increase for a single unit “that most Canadians would take for granted as being pretty price stable, even in this high inflation environment,” he said.

The North West Co. has about 165 stores across Northern Canada, serving more than 125 communities.

Most of them serve as community general stores, with a primary focus on groceries, but also carry an assortment of apparel, housewares and even big-ticket items such as Ski-Doos and boats.

So far, North West hasn’t passed on price increases to its customers on essentials, such as milk, bread, eggs, baby formula and diapers, Beaulieu said. But the cost of non-essentials, such as beverages and salty snacks, has gone up.

“There are some costs already flowing through. It’s unavoidable,” Beaulieu said, adding there’s more likely to come.

For some Nunavut-based Arctic Co-ops, the impact of high fuel prices is coming.

Arctic Co-operatives Ltd., which is owned and run by its consumers or members, serves a network of 32 co-ops operating grocery stores in Nunavut, Northwest Territories and Yukon.

Duane Wilson, vice-president of stakeholder relations for Arctic Co-op, said the government of Nunavut typically buys its fuel annually and adjusts fuel cost every fall. That means the territory is still running on previous reserves and has not seen the effects of recent price surges on its oil supply.

Even as northbound flights are buying fuel at market price, Wilson said there’s “an insulating effect” on fuel bought for southbound flights in Nunavut, which haven’t seen that increase.

For some air carriers, the higher costs are also further deferred until the end of June because their airline contracts are on a quarterly basis, he added.

“At this point, it’s fairly contained,” Wilson said.

Some northern airlines, including Air Inuit and Canadian North, have nonetheless added fuel surcharges on their flights and cargo.

Marie-Noëlle Pronovost, vice-president of commercial at Air Inuit, said the airline added a three per cent fuel surcharge on April 1 to its airfares and cargo services.

“This surcharge may increase in the next days in view of the continuing volatility in the markets,” Pronovost said in an emailed response.

If oil prices remain elevated into the fall, it’s likely that the Nunavut government will have to buy its fuel for the year at a higher price.

Wilson said if global fuel prices drop later on, communities would still be footing a higher bill for the following months.

This is also the time when Arctic Co-op grocers start running out of their shelf-stable inventory from last year and look to bring in their annual stock by cargo ship, which is generally the cheapest freight mode.

“Bunker oil, the fuel that’s typically used for maritime shipping, has also seen a dramatic increase,” Wilson said.

Wilson said rising fuel costs are concerning for Arctic co-ops, which are owned by their members.

“They’re concerned about the viability of their business, but they’re also concerned about food pricing because ultimately they’re the ones that pay it,” he said.

While Nutrition North Canada — a federal subsidy for retailers shipping food north — helps offset some of the costs and ease food insecurity, Wilson said it hasn’t been enough to keep up with inflation, especially given the dramatic price growth seen in the aftermath of the COVID-19 pandemic.

“The marginal benefit of that subsidy has continued to erode over time,” he said.

This report by The Canadian Press was first published April 21, 2026.

by Ritika Dubey, Canadian Press

High fuel prices driving up shipping costs for northern grocers

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