Gas prices in some parts of the Lower Mainland hit $1.48 a liter Tuesday with the summer driving season nowhere in sight. Hard to believe that’s the good news as business analyst Michael Levy says prices could hit the $1.70 mark by June.
Levy says there are valid reasons for mounting gas prices, one of them being a shortage of refining.
“The reason for that is that the refineries are not making any money, so they are closing down. The only way for them to make money is to raise the price of gasoline, but the market is not letting them.
This is also the time of the year when they make a change from winter grade gasoline to summer grade gasoline, so refineries do shut down for a week, or two, or three as the change the grade. That is putting pressure on the market.”
Levy also says it’s also all about where our gas comes from.
“For the rest of Canada, the flow of gasoline is east-west or west-east. We flow north-south. So our gasoline comes from south of the border and that adds an expense to it.”
But the biggest expense for drivers in British Columbia is taxes, according to Levy.
Drivers in GVRD pay 39.06 cents a liter in taxes before GST. That includes a 5.56 cents a liter carbon tax that will go up to 6.95 cents a liter on July 1.
On top of that, Metro Vancouver saw a two cent a liter increase in gas prices this weekend, to help subsidize the Evergreen Line construction.
Levy says at this rate, gas prices in Metro Vancouver will reach $1.70 a liter during summer months.
“That will start taking so much of consumers’ budgets to fill their car that it will have a very serious negative impact on consumer spending in other areas, which is bad for the economy.”
But Jason Parent, the Senior Associate at The Kent Group that works on petroleum markets and price analysis says he does not expect gas prices to get that high.
As tight as the supply can get in summer time, there are some ways for us to mitigate that. I don’t expect it to get as high as $1.70 in Vancouver, but I do expect it to continue to increase a little bit going into spring and summer.”
Global News polled its viewers on how high gas prices need to go before they abandon their cars for good.
Over 150 people voted as of publishing, and the vote is surprisingly split.
Close to 39 per cent say sky’s the limit for them and they are not parking their ride anytime soon. Nearly 20 per cent say they’ve stopped driving at $1.25 per liter, and 29 per cent say they will quit driving if prices hit $1.50 a liter.
Parent says he is not surprised by the number of people who are prepared to pay any price to get around in their cars.
Levy argues while some people say they will keep driving, their spending power elsewhere is diminished.
“They may not park it, but then they don’t have money for other stuff. In other words, I am not going to be scared, I am going to still drive…but you won’t have money to buy clothes this summer, or a flat-screen TV or go eat at a restaurant. That is a big problem.”
But is $1.70 a liter they highest it can go?
Levy says if there is a spike in oil prices because of a geopolitical event, like increasing tensions with Iran, the forecasts go out the window.
“If there is a serious description of an energy product coming to the market, we could see $1.70, we could see $2.25…because there is no shipping and no supply.”
Without a major cataclysm to affect oil prices though, Levy expects gas prices in Metro Vancouver will reach the $1.70 mark as soon as the first week of June.
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