As crude oil prices tumble, why isn't gas cheaper?
Josh Elliott, CTVNews.ca
Published Sunday, October 5, 2014 10:34PM EDT
Despite cheap crude oil prices and a seasonal dip in the cost of gas, Canadians are not seeing a big discount at the pumps because of a backlog at the country’s largest refinery.
The cost of a barrel of crude oil was US$101.70 on Sunday – more than $5 cheaper than it was on the same day last year. But gas in many Canadian cities is actually more expensive now because of refinery issues, experts say.
“Gasoline is made from crude oil and crude oil needs to be refined,” EnPro chief petroleum analyst Roger McKnight told CTV News. McKnight said that while Canada has a strong supply of cheap crude oil, its largest refinery has been slow to turn that crude into gasoline, meaning the gas supply isn’t as plentiful.
The Irving Oil refinery in New Brunswick recently started a $20-million maintenance project on its facilities, which has hampered its ability to produce gas.
“We have serious refinery problems, especially in the eastern part of Canada,” McKnight said.
Dan McTeague of Tomorrow’s Gas Price Today says refineries are also feeling the pinch of a weak Canadian dollar, and they’re passing their pain on to consumers.
“They can buy cheap crude in U.S. dollars, but these are Canadian refineries using Canadian currency, having to buy U.S. product,” McTeague said.
The Canadian dollar was worth about $0.97 in U.S. dollars at this time last year. Now, it’s worth just under US$0.89.
According to McTeague’s website, a barrel of crude was $5.70 cheaper on Sunday than it was one year ago. Despite that, Canadian drivers are paying more now than they did in October of 2013.
Toronto’s average gas price is 0.1 cents higher than a year ago, while Vancouver’s prices are up an average of 0.7 cents and Montreal gas costs a full two cents more than it did last year.
But Halifax, N.S. is facing one of the highest cost hikes. Last year, gas cost 125.4 cents a litre on Oct. 5. On Sunday, drivers paid an average of 135.2 cents a litre, according to Tomorrow’s Gas Price Today.
The Irving Oil maintenance project started on Sept. 12, and is expected to last up to eight weeks.
With files from CTV Ottawa’s Omar Sachedina