Gas prices to rise by 10 per cent, expert predicts
Published Wednesday, February 29, 2012 8:57AM EST
Closing refineries, problems in Europe and in the Arab world, and moody markets mean Canadian motorists can expect to pay high prices right into the summer, says one expert.
This week Montreal drivers were unexpectedly walloped, with prices rising 14 cents overnight -- from roughly $1.30 per litre on Monday to $1.44 on Tuesday.
And while prices varied widely across the country on Wednesday, from $1.41 per litre in Vancouver to $1.07 in Edmonton and $1.30 in Toronto, one thing appeared to be certain -- prices everywhere were on the rise.
"I've been saying (expect) a 12 to 15 per cent increase by the end of April. It's already gone up 3 per cent, so now I'm saying add 10 per cent to your pump prices today and that's what it will be by the end of April," oil industry analyst Roger McKnight told CTV's Canada AM.
"Normally gas prices fall off at the end of May when May 24 weekend is finished but I can't see that happening this year. I think it's going to stay right through to the middle of July."
That means motorists in Toronto will be paying $1.43 per litre by mid-summer, he said.
McKnight said a number of factors are driving up the price of fuel and each city is affected by a different combination of issues.
Montreal, for example, is closely tied to prices in the U.S. and particularly the wholesale price of fuel in Albany, N.Y. where rates have been creeping up. That's largely due to the fact the Eastern U.S. is losing three refineries in coming months. A fourth refinery in the Virgin Islands, which supplies New York harbour with gasoline, is also shutting down.
"That takes one million barrels of production out of the system so there is a lot of speculation that's going to affect supply when we get into the driving season," McKnight said.
The Montreal market is also "very moody," McKnight said, with only two dominant suppliers taking turns "restoring the market -- which means jacking it up."
Some parts of Western Canada are experiencing a similar tightening of the supply lines. Vancouver receives much of its fuel from nearby Washington State, where a major refinery caught fire on Feb. 17. That fire shut down the refinery, removing an additional 225,000 barrels of oil per day from the system.
The rules of supply and demand mean that as the fuel availability decreases, prices at the pump go up.
However in Edmonton, prices on Wednesday hovered at just $1.07 per litre. McKnight said Alberta is often sheltered from skyrocketing prices around the rest of the country, because the province has the lowest tax structure in the country.
European refinery troubles are another major factor affecting the Canadian and U.S. markets, McKnight said. The U.S. imports one million barrels of gasoline per day from Europe, where a major supplier is shutting down four refineries due to the high cost of Brent Sea crude needed to power the refineries.
Those rising crude costs, McKnight said, are largely being inflated due to tensions in Iran and Syria – major oil exporting nations currently experiencing political instability that has affected their ability to export their product.
Following are Wednesday's average gas prices in cities across Canada, according to Tomorrowsgaspricestoday.com:
- Edmonton: $1.07 (down three cents)
- Vancouver $1.41 (up .8 cents)
- Saskatoon: $1.23 (no change)
- Winnipeg: $1.18 (no change)
- Thunder Bay: $1.28 (no change)
- Toronto: $1.30 (down .9 cents)
- Montreal $1.41 (down 2.5 cents)
Across New Brunswick on Wednesday, according to gasbuddy.com, prices averaged $1.31 per litre. In Nova Scotia prices hovered at around $1.38 per litre. In Newfoundland, gas prices were 1.39 cents per litre, while prices in P.E.I. were $1.25 on average on Wednesday.