Gas prices could leap by up to 20 cents a litre

When Canadians head out on road trips this spring and summer, they can expect gas prices to take a bigger bite out of their wallets. But energy experts on this side of the border are divided over whether these hikes will be as high as U.S. motorists are bracing for.

Media reports Monday out of the U.S. were suggesting gas prices could rise in some areas this spring by up to 60 cents per gallon (roughly equal to 15 cents per litre). But Calgary-based petroleum industry analyst Michael Ervin sees nothing to suggest hikes of that magnitude in Canada.

Instead, he's predicting "modest" increases of about five to 10 cents per litre — "much much less than what we had become accustomed to seeing prior to the slump in the North American and global economy."

Every year, gas prices tend to rise when warmer weather and school vacations lure more people onto the highways and energy experts are expecting the same pricing habits this spring and summer.

But for analysts like Ervin, vice-president of the Kent Group in Calgary, there are a couple of factors that could mitigate against that increase this year.

"One is that we're unlikely to see much in the way of change in crude prices between now and mid-year. "

And considering "what is really still a tenuous global economy," Ervin doesn't expect OPEC will make any "rash moves" to tighten production and raise crude prices.

Overall demand for gasoline is still soft following the recession that began in 2008, and Ervin expects that refinery production is going to "quite easily keep up with seasonal higher demand for gasoline."

Not uniform across Canada

Whatever happens at the pump this summer, don't expect prices to be uniform across the country.

Ervin's not expecting much more than a four- to seven-cent hike this spring and summer, as "refiner margins in Western Canada have been fairly robust because of less expensive crude oil."

Another factor that could come into play is surplus gas in Europe, something Ervin sees keeping wholesale gasoline prices relatively depressed throughout the spring and summer.

"As bad news as it is for refineries, given the spare capacity and low refiner margins, that does add up to good news for consumers."

On the other hand, at GasBuddy.com, a website that gives consumers in Canada and the U.S. the chance to find the lowest reported gas prices in their communities, co-founder Jason Toews is expecting somewhat higher hikes in Canada later this year.

"I think we're going to see a peak of around $1.40 in May," he said in an interview from Regina.

Global market

The $1.40 price would represent an increase of almost 20 cents over GasBuddy's reported national average of nearly $1.22 per litre on Monday.

Toews sees the global supplies of crude tightening, and notes more cars are on the roads in China and India, fuelling increased demand for gasoline.

"The market for crude oil is a global one, and what happens in different parts of the world definitely impacts other parts of the world."

He expects crude prices and the "seemingly improving economy" to play into the higher prices Canadians will see at the pumps as demand for gas comes back.

While GasBuddy's average Canadian gasoline price sits at almost $1.22, the regional variations are stark: from $1.02 in Alberta to $1.39 in the Northwest Territories.

Even within cities, the price differences can be noticeable: in Toronto on Monday, reported prices ranged from $1.18 to $1.29.

Some Toronto gas stations change their prices two, three and four times a day, depending on things like rush hour or what their competitors may be doing, saysToews.

'Magical barrier'

Toews doesn't expect prices of $1.40 a litre to have a noticeable impact on people's driving habits, but predicts that could change if they rose by another dime.

"I think $1.50 is the next magical barrier."

Beyond the predictable factors that could influence gas prices, there are other unknowns that could come into play.

"There's always the potential for things to explode in the Middle East," said Toews. "A lot of oil-producing countries in the world are not that politically stable."

Hurricanes can also wreak havoc, particularly if they strike the U.S. Gulf Coast, which has 25 per cent of the U.S. refining capacity.

While gas price hikes seem inevitable for the spring and summer, Toews doesn't expect them to remain at that level throughout the year.

"Gas prices are a very seasonal thing, and we always see higher prices in the summer than we do in the winter."

Original Article
Source: CBC 
Author: Janet Davison