Why pump prices in Canada are rising
Kalibrate’s Senior Consultant, Vijay Muralidharan, was asked to comment on the rise by CBC news.
Why are we seeing such jumps in gas prices in Canada?
“The biggest driver for this is crude pricing. Since the end of 2020 the crude price has been marching along at quite high levels. For every $1 change in crude pricing, the gasoline price goes up by 0.55 cents. This is that time of year where refinery margins also go up at the same time along with crude pricing. There’s also a carbon tax that came into effect in April on 2.9 cents a litre.
“So the increase in gasoline price builds up because of these factors. There has been a lot of volatility in the market, and the market itself is trying to figure out what OPEC is trying to do. We have to wait to see what their plans are.
“We think they’re going to unwind supply in a measured way, which means they want to keep stable prices as well as increase supply to meet higher demand. We’ll soon see the price of crude at around $65 to $70 plus per barrel, which will facilitate the current levels of gasoline pricing until the end of summer.”
We expect the current price level to sustain until September, after which there should be some pullback in prices as OPEC slowly increases their supply, and the driving season demand wanes.
If OPEC decides not to provide adequate supply, gasoline prices will go up. If OPEC Plus decides to increase supply, then the gasoline price would decrease. If COVID-19 cases increase, gasoline demand will fall — and so will prices. We don’t expect gasoline prices to increase during the fall and winter months, but uncertainties remain.
Find out more about Canada’s latest fuel price trends in the Q2 Petroleum pricing in Canada report — available here
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