Gas-pain relief coming

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Phil Hossack / Winnipeg Free Press Long-haul trucker Chris Lajeunesse says there are always reasons for gas prices to climb.

Pump prices in Winnipeg could drop as much as 10 cents a litre within the next few weeks as lower crude-oil and wholesale-gasoline prices finally filter down to the retail level here.

"It could take three weeks," Michael Ervin, president of MJ Ervin & Associates, said in an interview Monday. "But the decline could be rather significant -- in the order of eight to 10 cents (per litre), potentially."

It would be a case of better late than never for Winnipeg motorists, since pump prices have been dropping steadily over the last month in the United States and parts of Eastern Canada -- about six cents a litre in Toronto and 21.7 cents a gallon in North Dakota -- but have remained stubbornly high here and in the rest of Western Canada.

Ervin, whose Calgary-based consulting firm regularly tracks retail gas prices in Canada, said prices should be heading down here because the factor that's been keeping gas prices elevated is being corrected. And that, coupled with a substantial drop in crude-oil prices over the last several months, should allow retail prices to drop throughout Western Canada.

And barring an unexpected spike in oil prices, pump prices should remain fairly stable over the summer, Ervin said, and maybe even drop a little more in the fall when demand for gas traditionally weakens.

While that would be welcome news for local motorists, two interviewed Monday said they're not holding their breath.

"I don't believe it for one minute," long-haul truck driver Chris Lajeunesse said as he stopped to gas up his car at a Tempo station on Inkster Boulevard.

Lajeunesse said oil companies are quick to increase gas prices when oil prices start climbing, but have a million reasons why they can't lower them right away when crude prices start falling.

"It just seems... there's always some sort of excuse. But it would be nice if it does happen."

Shanna-Rae Lee, who stopped for gas at the same station, was equally skeptical.

"I'm not sure what to believe. But I hope they do drop," Lee said, adding she and her boyfriend have been putting off a car trip to Minneapolis because gas was too expensive.

"If prices do come down, we'll be able to go a lot sooner... " she said.

The CEO of CAA Manitoba said it's about time pump prices started falling here.

"If it's going down all around you (but not here), that's not appropriate," Mike Mager said.

"There's got to be a good reason, and just because B.C. has higher rates shouldn't mean we in Manitoba should have to pay higher rates," Mager said, adding Manitoba motorists were also recently hit with a 2.5-cent-a-litre hike in the provincial tax on gasoline. "To me... somebody is walking away with extra profits here, and I think it's the big oil companies."

Not so, according to Ervin, whose firm consults for the petroleum industry, and Bill Simpkins, spokesman for the Canadian Petroleum Products Institute, which represents oil refineries.

They said buyers and sellers of gasoline futures determine wholesale prices based on supply and demand. When supplies are tight, that drives up prices. And what happens with wholesale prices has more impact on retail prices than fluctuations in oil prices, they said, although oil prices do affect them to some degree.

They said the reason wholesale prices have stayed high in Western Canada is because a fire last February knocked out production at a refinery in Washington state that supplies the Vancouver market. It's only in the last couple of weeks that BP PLC's Cherry Point refinery has come back online, they said. And with it producing gas again, that will boost supplies on the West Coast and allow wholesale prices to fall across the west.

Simpkins said if it's any consolation, Winnipeggers were already paying less for gasoline than motorists in most parts of Eastern Canada. So the price declines there have just brought their prices more in line with prices here.

"The good news is your prices aren't far off the prices for other parts of the country."

murray.mcneill@freepress.mb.ca

Prices explained

HERE'S the Canadian Petroleum Products Institute's explanation for why high wholesale prices in Vancouver drive up prices in the rest of Western Canada:

When a disruption in gas supplies drives up wholesale prices in Vancouver, buyers and sellers of gasoline futures usually bid up prices in the other western provinces to maintain a balanced market. Otherwise, you could see truckloads of Prairie gasoline being hauled to the West Coast to take advantage of the higher prices there, and that could create shortages in the rest of the region.

Republished from the Winnipeg Free Press print edition June 12, 2012 B4