Why gas prices are so high and what to expect in the fall
Gas costs are anticipated to achieve an annual excessive this summer time throughout Canada and into fall, with a couple of issue inflicting the rise, consultants say.
Canadians are already paying extra on the pumps during the last week with costs skyrocketing in some areas.
According to knowledge from the Canadian Automobile Association (CAA), the typical value throughout the nation on Aug. 16 is 169.3 cents per litre. Per week in the past the typical was 163.9 cents per litre.
GasBuddy, a fuel value indicator, reveals B.C. has the best fuel value at 192.8 cents per litre, adopted by Nova Scotia at 186.3 cents per litre and P.E.I. at 186 cents per litre.
A couple of stations in Yukon, in response to GasBuddy, present excessive costs round 193 cents per litre, although it isn’t a mean for costs within the territory akin to knowledge from different areas.
The lowest fuel costs as of Aug. 16 in response to GasBuddy are Alberta with a value of 146.4 cents per litre, the Northwest Territories at 159.3 cents per litre and Saskatchewan at 161.3 cents per litre.
Gas costs have been on the rise for a couple of months.
The July Consumer Price Index (CPI) report from Statistics Canada “mainly” blamed a rise in inflation on gasoline. Headline inflation elevated from 2.8 per cent in June to three.3 per cent in July.
“Excluding gasoline, the CPI rose 4.1 per cent, edging up from 4.0 per cent in June,” the CPI, launched Tuesday, states.
Experts say there are a couple of components taking part in into why the price of fuel elevated and why the costs are seemingly right here to remain.
WHY GAS COSTS MORE
Michael Manjuris, professor and chair of Global Management Studies at Toronto Metropolitan University, informed CTVNews.ca in an interview poor climate and an absence of provide are accountable.
One issue behind greater fuel costs, Manjuris stated, is a latest determination from the Organization of the Petroleum Exporting Countries (OPEC), which controls crude oil provide to many of the world.
In June 2023, OPEC lowered the every day output of crude oil to 1 million barrels a day. This lower drives prices up and can proceed to take action as this lower is rolled out in different international locations within the coming months.
“That’s a significant reduction in supply,” Manjuris stated. “If there is no change in the world demand for oil…Then it’s basic economics: your supply goes down, your demand is the same, and we start to see a second factor, causing prices of retail gasoline to go up.”Storage for refined petroleum merchandise is one other concern, Manjuris stated.
“We don’t have a lot of spare capacity,” he stated. “So anytime there is a major weather event that hits refining areas like Texas, California or us (Canada)…That’s a significant chunk of the refining supply that gets taken off the market.”
Weather occasions like wildfires, tornadoes and important storms can injury refineries that can’t be fastened shortly. Manjuris says when this happens the plant could be down for months at a time.
“There’s a distribution center in Gretna, Man., where we have a convergence of crude oil pipelines, and twice this summer they’ve had to shut down that distribution center, only temporarily because the equipment couldn’t operate in a reliable fashion,” Majuris stated.
In heatwaves, expertise can malfunction and a discount of capability is required or a full shutdown, he stated.
PREDICTIONS FOR COMING MONTHS
Manjuris says some climate components, like excessive warmth, won’t be a difficulty within the subsequent few months, nonetheless, fuel costs will stay elevated.
“Into late summer time, early fall, all of the indications I’m seeing is that the value of gasoline in southern Ontario, notably, however throughout Canada, goes to go up,” he stated.
Manjuris believes Canadians might count on near $2 a litre over the following few months.
The heightened costs have been climbing for the previous six months, Pedro Antunes, chief economist on the Conference Board of Canada informed CTV News Channel Tuesday.
“When we’re comparing in June, we’re looking at the very strong or very high levels that we saw a year or a year prior, but in the last six months, gasoline prices have been increasing,” Antunes stated.
Oil barrels have gone from US$70 to US$80, he stated.
“That’s going to be reflected in gasoline prices going forward,” Antunes stated.
Manjuris believes fuel will proceed to extend in value earlier than it falls.
“I am personally predicting something between $1.95 and $1.98, in southern Ontario, into the early fall, but I suspect it will come back down by wintertime after that,” he stated.
A petroleum summer time mix prices extra to make than winter blends, which is likely one of the components why fuel costs usually drop going into winter.
As a results of this, Manjuris says, there’s all the time a discount of value by about eight to 9 cents a litre.
With information from CTVNews.ca’s Tara De Boer.
