Crude reality: New report suggests gas prices will continue to rise in 2022

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Crude reality: New report suggests gas prices will continue to rise in 2022
WATCH: Where oil prices go, gas prices usually follow. Sarah Offin looks at what’s driving expected increases in 2022. – Jan 13, 2022

Gas prices have been a fickle passenger along the highs and lows of the pandemic ride.

From just over 60 cents per litre, as initial lockdowns left Canadians with few places to go, to record highs.

And now predictions that increases will continue alongside the rising price of crude.

“That’s the cost that’s changing sort of month to month, quarter to quarter as we work our way through demand shocks based on the pandemic,” said Kent Fellows, an associate professor of economics at the University of Calgary.

The University’s School of Public Policy released a report on Thursday outlining reasons for the recent volatility in prices. Some analysts are forecasting oil prices to rise to about $100 a barrel this year, an attractive prospect for producers, but still a risky move in yet another COVID wave.

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“Depending on on how this new variant hits different countries, you could see a drop off in demand, and then they’re stuck with the crude oil,” said Fellows. “So I think that level of uncertainty is going to be playing out in terms of less production, not more.”

‘Energy and Environmental Policy Trends: What’s Driving the Cost of Driving?’ released by the University of Calgary Jan. 13, 2022. University of Calgary

The good news, at least for producers and energy royalties, is that less production generally means more demand.

“There is an energy crisis – and a burgeoning one at that,” said petroleum analyst Dan McTeague. “Both in Asia and Europe you just have to look at the price of every kind of energy commodity and they are through the roof. [Canadians] are not going to be insulated from this. And, unfortunately, it means in 2022 we’re going to see an average increase of gas and diesel prices about 20 per cent higher than in 2021.”

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