Fort McMurray fire will cost all Canadians dearly, says expert

Canadians from coast to coast will haveto foot the heftybill for the Fort McMurray rebuild, whether they realize it or not, says one economics expert.

Atif Kubursi, a professor emeritus at McMaster University, says Canadians can expect to see higher gas prices, raised insurance premiumsand deferred infrastructure investments from the federal and Alberta governments as a result of the disaster.

Analystsestimatethat the fire could cost insurers as much as $9 billion, butKubursi says companies will offload thatburdenonto consumers.

"One way or another, the insurance companies are going to recoup their losses," he warned.

"When you lose $9 billion in insurance claims, all claimsall over Canada and even beyond are going to rise, because insurers pool risk."

Paying for it at the pump

Because oil has a high price inelasticity,even small drops in production will reflect themselves immediately and disproportionately in higher prices, Kubursi said.

• Oil prices jump as Fort McMurray wildfire slows down oilsands production

"People at the pump are going to pay for it, and not in Alberta, but in Canada and broadly in the rest of the world," he projected.

To rebuild homes, erect newbuildings, pave newroads, and lay new utilities will cost governments dearly, and unless governments want to run deficits even bigger than those predicted, he expects taxes to rise.

"The finances of the federal government are limited," he said. "They have to make up for it... by raising taxes."

Kubursi also suggested that federal and provincial infrastructure programs may be put on hold, as money earmarked for new investment is diverted to "rebuildthe past" in Fort McMurray.