Energy industry experts are warning that the 14-cent per litre spike in gasoline prices in Montreal on Tuesday is just a taste of the high fuel costs Canadians can expect in the coming months.
The average pump price in Montreal was $1.44 a litre, compared with $1.30 a day earlier, according to price-tracking website Gasbuddy.com. By contrast, the Canadian average only rose a penny to $1.28.
“I’m expecting to see the national average breaking all-time highs. We’ll likely see $1.45 to $1.50 this summer,” said Jason Toews, co-founder of Gasbuddy.
Roger McKnight, senior petroleum adviser at En-Pro International, agreed more pain is in store for motorists.
“I’m calling for gasoline prices at the end of April to be 12 to 15 per cent higher than they are today, right across the country,” he said.
The potential national unity implications of higher oil prices have surfaced in recent days.
While some regions celebrate the benefits of higher oil prices, there is resentment in other parts of Canada about the impact of a high “petro-dollar.”
Ontario Premier Dalton McGuinty has said booming oilsands development is pushing up the Canadian dollar, making it harder for the manufacturers in his province to export goods. His Alberta counterpart, Alison Redford, has shot back, calling that approach “simplistic.”
On Tuesday, that same pressure was mounting within Quebec. With a provincial election looming as early as this spring, high oil prices appeared as an irresistible attack theme for the province’s separatist opposition party.
The pro-Canada government of Jean Charest found itself under attack during a six-minute exchange in the legislature, as the Parti Quebecois repeatedly urged it to take action to reduce prices.
One PQ legislator asked: “Is the Liberal government on the side of the big oil companies, or on the side of Quebecers?”
Also, a speechwriter to PQ Leader Pauline Marois took to Twitter to decry what he called the $24 billion negative impact of Canada’s “petro-dollar” on Quebec’s economy, notably in reduced exports. He cited the government’s silence as proof the Charest government is beholden to the energy industry.
Alberta enjoyed the lowest gas prices in the country on Tuesday, with Edmonton posting an average of just under $1.10 and Calgary averaging $1.12.
Montrealers, meanwhile, were already reacting to the burn.
A frustrated Jade Stevenson spat out a profane response when asked about the increase.
“I can’t carry my kids to school on my back, I’ve got to use my vehicle to get to work, so I’m pretty well stuck,” Stevenson said as he filled up his massive Lincoln pickup truck at a gas station near the Bell Centre.
Stevenson’s fill-up cost him $1.42 per litre, forcing him to use his credit card twice on the same visit. The pump only accepted a maximum payment of $100 on each swipe and his total came to more than $132.
“I don’t know what can be done,” he said. “I just have to live with it for now and hope that the government, or somebody, steps up to the plate and does something about it.”
While Stevenson grappled with the feeling of helplessness, a pump attendant at a full-service station around the corner battled boredom.
Bilal Aysh tapped away on a laptop in a cramped booth along one of Montreal’s busiest boulevards. In one 10-minute span, he didn’t serve a single customer.
“Today is not normal,” said Aysh. “It’s very quiet because of the price.”
Gas prices generally rise as the weather warms up and motorists take to the road, bumping up demand.
The increase Toews and McKnight foresee would break the record national average above $1.40 hit during the summer of 2008 when crude oil – the main ingredient in gasoline – rose to US$147 a barrel.
Toews said crude oil is part of the equation this time around, with tensions in the Middle East making speculators nervous.
“That will definitely cause some big problems with gas prices,” he said.
North American benchmark crude for April delivery settled below US$107 on the New York Mercantile Exchange on Tuesday. But North Sea Brent crude, which many refineries in the eastern part of the continent use to make fuel, has been trading much higher, settling at US$121.55 a barrel.
McKnight sees the higher gas prices less as a function of higher crude and more as a result of recent woes in the refining industry.
Refineries in the east that use Brent crude have seen their costs go up significantly, causing two Philadelphia refineries to shut their doors in recent months, and a potential third closure in the summer. Since the Canadian and U.S. markets are so interconnected, it has ripple effects north of the border.
“So all of a sudden we’ve got this big black hole emerging right now and that’s what’s driving prices up,” said McKnight.
“It’s a huge domino effect, really.”
In Montreal, the effect is particularly severe after Shell decided to close its 130,000-barrel-per-day refinery there in 2010, reducing competition in that market.
Now, the city relies on fuel from Suncor Energy Inc.’s (TSX:SU) refinery there, and another run by Ultramar in Quebec City.
The prices consumers are willing to stomach has gradually shifted over the years, said Toews.
He recalls that in the fall of 2005, in the aftermath of hurricane Katrina, consumers were outraged by gas prices above $1 a litre.
“But now look where we are. Six short years later, we view $1 per litre as being cheap. We would love to have gas at $1 per litre again,” he said.
And after the 2008 run-up, gasoline prices above $1.40 per litre – as Montreal and Vancouver are experiencing now – “doesn’t scare anybody anymore, not like it used to,” Toews said.
“I think once you start getting to $1.50 or $1.60, then people really start taking notice and might start getting upset again.”
Consultancy Kent Marketing Services also found an upward trend in pump prices in its latest weekly survey released Tuesday. Gasoline averaged $1.32 per litre in the last seven days, compared with $1.27 a week earlier and $1.20 a year ago.
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