The novel coronavirus that has led to mass quarantines around the world and sparked fear of more outbreaks has also put a dent in gas prices as crude prices plunged.
The cost of petroleum typically “firms up” this time of year, according to Dan McTeague, president of Canadians for Affordable Energy.
“They don’t drop. They don’t quite yet increase,” he told CTV News Toronto on Saturday. If there’s much movement in the spring, prices will generally go up as providers make a switchover to “summer blends,” which are more expensive.
“The fact that they have dropped as much as they have -- some 13 cents a litre in the past week alone -- is rather significant and can be directly attributed to the panic in the market over COVID-19,” he said.
COVID-19, the novel coronavirus that originated in China, has infected more than 111,000 people worldwide and killed nearly 3,900, mostly in China. More than 62,300 people have recovered, according a tally kept by Johns Hopkins University.
Outbreaks of the infectious disease have led to travel restrictions around the world. In Italy, more than a quarter of the country’s population has been placed under sweeping quarantine measures. In January, the Chinese city of Wuhan was placed under lockdown, leading other cities in Hubei province to impose travel restrictions affecting more than 50 million people. As the virus spread, varying degrees of lockdown were imposed on as many as 500 to 760 million across China, according to multiple news reports.
The widespread restrictions mean fewer cars are pulling into gas stations. China is the second largest consumer of oil globally, said McTeague.
“When you consider how many factories are idled in China… it doesn’t matter how much supply you have out there. The reality is that there are no buyers,” McTeague told CTV Morning Live in Ottawa in late February.
With COVID-19 spreading globally, demand for energy is easing as people cut back on travel and major events are being cancelled.
Crude oil prices are tumbling dramatically as Saudi Arabia, Russia and other oil-producing countries argue over how much production to cut in order to prop up prices, raising concerns that the dispute could lead a global economy, already weakened by COVID-19, to be flooded with an oversupply of crude. There are also reports that Saudi Arabia could even increase its oil production in order to gain market share.
“As a result, there’s plenty of oil to go around,” McTeague explained, leading to the price drops. “Between coronavirus and the OPEC inability to meet the objective of further oil cuts is one of the main reasons why oil and gasoline and diesel and aviation fuel are truly in a freefall.”
McTeague said it’s likely that gas prices will drop “well below” the range seen about a year and a half ago when some pumps read 97-98 cents a litre at the highest, while other dipped below 90.
With files from Solarina Ho