As gasoline prices in Canada close in on record highs, there’s little relief in sight for drivers from coast to coast.
With oil prices climbing, analysts predict high prices at the pumps through spring and into the busy summer driving season.
“My outlook is we’re going to see prices remain for the summer, more or less, at the levels we see them right now,” said long-time gasoline market-watcher Michael Ervin at Kent Group Ltd.
The average price of regular gasoline in the country, from Kent Group’s latest survey, is $1.38 a litre. Prices have rarely been this high. In 2008, when the price of oil spiked and nearly reached US$150 a barrel, gasoline was $1.38 for a stretch of about a month in early summer. A record average Canadian gas price of $1.40 a litre was set that July. Then, in 2014, with oil around US$100 a barrel, there was a similar stretch in early summer, with a new record of $1.41 in late June.
When gasoline previously crested at $1.40 a litre, the oil prices thereafter fell. In 2008, it was the global financial crisis and recession, and in 2014, demand fell as supplies remained ample. This time, however, the price of oil is not predicted to fall back significantly any time soon.
Rising gas prices are already starting to bite the wallets of Canadians, who previously enjoyed several years of low gasoline prices. Canada’s most recent inflation data, from March, showed a 2.3 per cent increase. It was the largest rise in inflation since October, 2014, according to Statistics Canada, and roughly a quarter of the increase was because of more expensive gasoline.
Dan McTeague, an analyst at GasBuddy, said he foresees similar results when Statistics Canada issues April inflation numbers on Friday.
Gas at $1.38 a litre is up from a Canadian average of about $1.10 a year ago – more than 20 per cent higher. In dollars-and-cents terms, the 28 additional cents per litre adds up over time, noted Mr. McTeague. For a typical driver who pumps 50 litres a week into his or her vehicle, it’s $14 more per fill. If the situation stretched over the course of a year, the extra cost is more than $700, a sizable bill for most Canadians.
“There was a lull in prices where people were accustomed to paying less,” said Mr. McTeague. “Expect these current prices to remain in place. The wide concern is how high, and how long. It’s having a sobering impact on people’s plans. It could be an interesting summer in terms of tourism.”
The benchmark price of oil last week cracked US$70 a barrel, for the first time since late 2014. Analysts such as Martin King at GMP FirstEnergy predict the average oil price in the high US$60 range through 2019. Bullish oil investors such as Eric Nuttall of Ninepoint Partners believe the commodity will climb towards US$80 a barrel next year, underpinned by strong global demand and relatively tight supply.
On a broader economic basis, rising gasoline prices can slightly dampen consumer confidence, and serve as a mild break on consumer spending, said BMO chief economist Douglas Porter.
The economy is more resilient to energy prices than in decades past. In 2014, for instance, the Canadian economy grew about 3 per cent, even as gas prices hit record highs.
“It would take a tremendous increase in oil prices from here to seriously damage the economy,” said Mr. Porter.
While gas prices this year have spiked higher, and stayed high, the experience is only a fraction of the case in 2014. That year, the average national price pushed above $1.30 a litre in late February and stayed above that mark for 30 weeks through mid-September. Gasoline this year has been above $1.30 for six weeks so far, from around the start of April.
As the national average stands near the 2014 record of $1.41 a litre, drivers in Vancouver have grappled with sky-high prices since early March, when gasoline crested $1.50 and reached $1.61 at the start of May. Gasoline supplies in the region have been tight because of maintenance of refineries in the area and in Washington State. Gas in Vancouver is still at $1.60 a litre, compared with $1.29 in Calgary, $1.36 in Toronto, $1.42 in Montreal and $1.29 in Halifax.
Mr. Ervin, the Kent Group analyst, said what irks drivers the most is swings in prices.
“We see more dissatisfaction when prices are volatile than when prices are stable, even if those prices are high,” said Mr. Ervin.