A buck sixty a litre.
That’s one projection on how high gas prices (seasonally adjusted) could potentially rise in the weeks ahead – and that’s before the busier summer driving season.
“As unpopular as it might sound, current retail gasoline prices look too low,” a research note from Capital Economics said Friday.
“Overall, gasoline prices could climb even higher as we approach the busy summer driving season.”
The reason? There are many, as noted here.
READ MORE: What’s behind the recent surge in gas prices?
But Capital Economics, a global independent research firm with a Canadian office in Toronto, cites the lower loonie as a primary one.
The loonie’s recent slide to around 90 cents US is raising costs for Canadian refiners, the researcher says.
Domestic refineries, which buy oil in US dollars to process into gas, have so far taken some of the financial hit created by the currency swing without flowing it entirely onto drivers, the note suggests.
“For the time being, it seems that Canadian refineries are absorbing the added costs,” economists at Capital Economics said in the note.
Before you spit that mouthful of coffee out there’s some evidence to support this, according to the economists.
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Profit margins from refining activities at oil companies are actually slimmer this spring than last – or are 15 per cent compared to 20 per cent last April, according to the Natural Resources Canada.
Risks of rising gas prices
If the loonie continues to lose value or refiners look to fatten margins back to previous levels, gas prices could rise further, even if oil prices remain where they are.
“Assuming that crude oil prices hold, it is possible that seasonally adjusted gasoline prices could rise to $1.60 before the busy summer driving season,” Capital Economics say.
That’s unwelcome news for households as well as businesses such as Nova Scotia bed-and-breakfast owner Barbara MacPherson, who said Friday there’s little choice but to bear the added load.
“We don’t have any choice; I live in the rural part of Nova Scotia,” she said by phone.
“We have to pay to get places and run our business and that’s the way it is.”
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