February 26, 2015 1:56 pm
Updated: February 26, 2015 5:04 pm

Gas prices expected to jump in several Canadian cities in coming days

Gas prices were 27 per cent lower in January compared to January 2014. But pump prices have rebounded sharply since.

CANADIAN PRESS/Ryan Remiorz
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Gas prices are popping across the country, with some cities expected to see a rise of as much as eight cents per litre in the next 24 to 48 hours.

That’s according to Dan McTeague, gas price analyst at gasbuddy.com who tracks wholesale and retail prices for gasoline about as closely as any expert in Canada.

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Gas prices will rise two cents a litre in the Greater Toronto area at midnight, McTeague said, while Vancouver motorists can expect fuel to cost four cents more tomorrow. Gas prices on the West Coast are averaging $1.24.9/litre as of Thursday and $103.9 in the Toronto area.

In Calgary meanwhile, a city in a province that enjoys cheaper gas for a variety of reasons including lower taxes, pump prices will “remain stable” over the next few days, McTeague said. But commuters can expect a two-cent rise next week and the same applies for Edmonton.

Gas costs on average $0.94/litre in Calgary and $0.92 in Edmonton, according to gasbuddy.com.

MORE: Gas prices are rising across Canada — and will likely jump further

Retail gas prices fluctuate between regions, experts say, based on several factors including how much regional distributors paid at the wholesale level, the amount of profit margin they think they can collect from gas stations. There are also differing tax rates between provinces, with gasoline taxes generally lower west of Ontario.

8-cent pop

Winnipeggers will bear the biggest hit from what appears to be an accelerating run-up in gasoline prices. The Manitoba centre is expected to see an eight cent pop to an average of 96 cents by Monday or Tuesday, McTeague predicted.

Further east in Montreal, the analyst said prices will likely climb four cents by next week, to $1.22.2 per litre. Halifax, meanwhile, will see a three cent bump before the weekend, McTeague predicted.

After falling to an average of $0.91 cents per litre in January – down 27 per cent compared to gas prices a year earlier in January 2014, according to Statistics Canada – retail gas prices have rebounded strongly this month.

“The gap is narrowing,” McTeague said.
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Rise explained

Canadian motorists across most of the country have dealt with frigid driving conditions for the past several weeks, and are now confronting another biting reality as a result: higher gas prices.

A brutally cold February has meaningfully dented production at U.S. refineries that make gasoline destined for Canada or influence the price for gas that is refined at one the 15 refineries here.

The cold weather has resulted in temporary shutdowns for a number of facilities in the U.S. northeast, according to McTeague. “There’s no scarcity of oil at the moment but there is for gasoline in certain markets,” he said. “This cold weather has stopped a lot refineries in their tracks.”

McTeague said some refineries at this time of year also begin maintenance duties undertaken before they switch over to summertime petroleum, which includes changing up processes to include additives that mitigate emissions.

Not-so-low oil

Oil prices remain low compared to last year, experts say (WTI benchmark prices are still below $50 a barrel U.S.), but Canadian gas is derived from two sources of crude that have been rising in recent weeks: Brent crude and Western Canada Select, which is pulled from the oil patch.

Since touching a low of below $50 a barrel, Brent crude has climbed more than $10 a barrel, trading Thursday at $60.52 (U.S.).

“I don’t see a discrepancy” between oil prices and gas prices, said Michael Ervin, president of MJ Ervin & Associates, which conducts market research on Canadian energy prices. “If you look at crude prices that matter in Canada, there are principally two, Brent and Western Canada Select. If you look at both of them since the beginning of the year to now, they’re both up.”

The combination of tightening supply and a rise in oil prices have lifted wholesale North American petroleum prices since late January, that is now filtering through to retail pump prices. Average Canadian retail gasoline prices bottomed out at 91.3 cents a litre on Jan. 20, according to Natural Resources Canada. Since then, they’ve climbed about 13.5 per cent (see chart) to $1.03.7.

Prices ‘magnified’

Prices in Canada are being exacerbated by three factors above and beyond supply constraints, McTeague said. The first is the Canadian dollar, which has weakened a further 5.5 per cent since mid-January against the U.S. greenback. Much of the fuel sold in Canada is imported and much be purchased in U.S. dollars.

Government taxes also amplify the jump in prices for end-users, since HST and other taxes collected in each province are a fixed percentage of the pre-tax price.

Charging 13 per cent tax on a $0.80 per litre wholesale price compared to $0.90 cents, for example, amounts to a 1.5 cent per litre difference in the final cost. “As gas prices go up, [taxes] tend to magnify the [cost] to consumers,” McTeague said.

Gas distributors have also started to inflate profit margins again. “Gas was selling without any retail margin, often even below cost” last month, McTeague said. “There was a gas war that took place that brought prices down.”

With tightening supplies now, Canadian gasoline distributors are once again raising prices, he said.

jamie.sturgeon@globalnews.ca

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