Gas pains

Hey there, time traveller!
This article was published 11/03/2016 (3481 days ago), so information in it may no longer be current.

Gas prices in Manitoba could be pushing $1 a litre again by mid-June, but analysts say that summer road trip should still cost less than last year.

That’s because local motorists were shelling out anywhere from just over $1 to as much as $1.22 for a litre of regular gas last summer, as a combination of record-high demand and record-low supplies kept pump prices elevated.

But it should be a different story this summer, according to Jason Parent, vice-president of consulting with Kent Group Ltd., a London, Ont.,-based firm that does consulting work for the petroleum industry.

“I do expect prices to rise between now and summer, but I don’t expect them to get as high as last summer,” Parent said in an interview. “Probably no higher than a dollar (in Manitoba).”

He said while demand is likely to be strong again this summer, there is currently a glut of gasoline in North America. So barring any major refinery shutdowns or a big rebound in oil prices, that should keep pump prices below last summer’s levels.

Dan McTeague, senior petroleum analyst with GasBuddy.com, wouldn’t predict how high pump prices might go this summer.

“But I don’t think you’ll get there ($1.22 a litre),” he added. “I’m not expecting a repeat of last summer.”

McTeague said what usually happens is that gas prices start climbing as spring approaches, they peak just before the July 1 long weekend, and then they kind of bounce around a bit for the summer months. Once the summer travel season ends and demand begins to ebb, prices start coming back down.

Parent agreed that if pump prices top out at about $1 a litre this summer, there could be an uptick in summer travel this year. But he said it likely won’t be a big increase because the economy, especially in parts of Western Canada, is still struggling.

However, John McCallum, an economist with the University of Manitoba’s Asper School of Business, thinks Manitobans will be taking quite a few more road trips this summer if gas prices remain 20 cents lower than last summer.

‘I think worst-case scenario would be 95 cents (per litre by early April)… Best case scenario would be 88’– Dan McTeague, senior petroleum analyst with GasBuddy.com

McCallum said 20 cents a litre is a substantial savings, and many families will likely see it as a good opportunity to do more travelling this summer.

“All of a sudden, getting from point A to B for a vacation gets cheaper by car. So I absolutely would think that one, people are going to be driving more, and two, people are going to be driving more in Canada because America has become so expensive because of the (low-valued) Canadian dollar.”

Parent noted wholesale gas prices have already been climbing in Canada over the last few weeks, and that’s also driving up retail pump prices. In Winnipeg, the average price of a litre of regular gas has gone from 67.4 cents in mid-February to 81.9 cents earlier his week. And in the last two days, some stations have even boosted their posted price to 88.9 cents.

Parent said a number of factors are driving up wholesale gas prices. He noted prices in Western Canada are heavily influenced by events in the U.S. Midwest, and a couple of weeks ago several major refineries there announced they’d be scaling back production because U.S. gasoline inventories are at record-high levels. That alone was enough to start wholesale prices climbing.

He and McTeague also noted this is the time of year when U.S. refineries begin performing spring maintenance work, which can slow down production and start switching from winter- to summer-fuel blends.

McTeague said the switch to summer-fuel blends, which cost more to produce, is one of the main reasons gasoline prices traditionally rise during the spring and early summer. Another is that with the arrival of warmer weather, demand starts ramping up as people start driving more.

He predicted pump prices in Winnipeg will continue to rise until about the first week in April. Then they should stabilize for a bit.

“I think worst-case scenario would be 95 cents (per litre by early April),” he added. “Best-case scenario would be 88.”

murray.mcneill@freepress.mb.ca