Many Canadians are paying far less at the pump this holiday season than they have in recent years, but experts say to enjoy it while it lasts. The price of gas will likely rebound in the coming weeks.
The average retail price across Canada was hovering around 98 cents a litre on Christmas Eve, down significantly from about $1.15 a litre at the same time last year, and roughly $1.20 a litre two years ago.
In some cities, the news was even better for consumers. Gas prices in the Ottawa area were just above 80 cents per litre at many stations on Thursday morning. Brampton had the lowest prices in the GTA, with a litre of regular running about 88 cents.
Dan McTeague, a senior petroleum analyst at GasBuddy.com, called it “a Christmas gift.” Gas retailers are buying fuel at about 87 cents a litre wholesale in Ottawa, he said, “so they’ve giving it away right now” because of a price war in the nation’s capital.
McTeague said Ottawa’s drivers in particular should get out and fill up quickly, as the bargain prices are likely to rebound to about 98 cents by Sunday or Monday.
“Prices have to be restored otherwise a lot of these gas station outlets will go bankrupt.”
A similar rebound for other cities experiencing a dip in price is expected within a few weeks. It’s a bit of a “head fake” for consumers who think the low price of oil will inevitably lead to lower prices for the refined material they buy at the pump, McTeague explained.
“People are looking at oil and saying ‘oh my goodness it’s dropped to $37 a barrel’, but beside that there is the refined gasoline market, and that market has seen some pretty substantial increases, mostly owing to the fact that demand in the U.S. is going up.”
With that upward pressure on prices and the fact that the Candian dollar is faring poorly (crude oil prices are always quoted in U.S. dollars), McTeague said the situation at the pumps across the country will probably look much as it did last year by February or March.
Meanwhile, Vancouver residents are still seeing much higher prices (averaging $1.23 a litre on Thursday) as a result of a partially shut-down refinery and weather issues.
READ MORE: Why gas prices in B.C. remain high despite drop in oil prices
According to a recent survey conducted by the Canadian Automobile Association, only a third of Canadians (34 per cent) believe gas prices will rise in 2016, while 56 per cent say they will either stay the same or decline even further. But cheaper gas hasn’t translated into more driving. A solid majority of Canadians – 63 per cent – said they are driving about the same amount as before gas prices started to drop.
Good for drivers, but not for the economy
The falling prices are a function of the broader collapse of the price of oil worldwide, said Ian Lee of Carleton University’s Sprott School of Business, and that collapse is being blamed on supply outstripping demand. Simply put, the world’s big producers are pumping out more oil and gas than is needed. On the demand side, China and even Canada are not consuming as much.
While it may help individual drivers (for a few days or weeks at a time) by keeping more money in their pocketbooks, low oil and gas prices are not good for the Canadian economy overall, Lee said.
“Oil and gas is about one-third of the totality of our exports … So there’s a lot less money flowing into the economy.”
In sum, Lee said, the falling price of oil is good for gas at the pump, but not good for very much else.
“It’s going to lead to lower revenues for governments federally and provincially, it’s going to lead to higher unemployment, lower economic growth.”
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