WATCH ABOVE: Gas prices soar as oil prices plummet in Alberta. Gary Bobrovitz reports on Aug. 12, 2015.
CALGARY – Western Canada is being hit with the twin pains of the lowest prices for heavy crude in years alongside a significant spike in gas prices.
Much of Canada west of Thunder Bay saw gasoline prices jump 15 cents a litre this week for the biggest increase since 2008, says Dan McTeague, a senior petroleum analyst at GasBuddy.com.
He says the spike in prices is being caused by the shutdown at BP’s refinery in Whiting, Ind. It distills about 240,000 barrels of oil per day, representing roughly 10 per cent of Midwestern U.S. supply.
Higher-than-usual demand for gas in the U.S. is also contributing, while the lower Canadian dollar is playing a part in high prices at the pump across Canada, says McTeague, because gasoline is traded in U.S. dollars.
He adds Canadian motorists are losing an average of 11 cents a litre from the lower loonie.
That drop in the loonie has been caused in part by Western Canada’s other migraine – lower crude oil prices. The price of crude oil hit its lowest level in more than six years on Friday amid concerns about China’s sputtering economy and strong global production.
The price of Canada’s crude output closed at US$22.83 a barrel Thursday after the discount to the main U.S. WTI oil price widened this week.
McTeague says the BP refinery shutdown is also partially to blame for the drop in Canada’s crude prices because it is a major processor of the product.
“The BP plant was the darling of Canadian heavy oil,” says McTeague.
BP says it shut down the largest of the three crude distillation units at Whiting Refinery a week ago for unscheduled repair work. The company has not said when the refinery will be back up and running.
Until then, says Roger McKnight, chief petroleum analyst at En-Pro International, producers and consumers are struggling.
“Not only are the consumers being hit pretty hard at the pump, but producers are starting to scratch their heads too because the price of crude they’re trying to get out of the ground is getting near the bottom of the barrel financially.”
McKnight said the BP refinery also processes crude from the key storage point of Cushing, Okla.
“The problem that we have now is that with crude supply outstripping demand, you’re going to run out of storage space for the crude,” said McKnight.
At current rates, Cushing could fill by November.
“Then the price of crude is going to go even further into the toilet, and good luck in Alberta and Saskatchewan.”
McKnight is not speculating as to when the BP refinery will restart, but says when it does, wholesale gas prices will drop 15 cents overnight.