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VANCOUVER â Gasoline prices rolled closer to record levels across Canada on Thursday, an unwelcome sign that crude prices are high and refiners are getting ready for the summer driving season that's just around the corner.
People who watch gas prices for a living predict that the suffering at the pump will get worse before it gets better, with prices potentially reaching $1.50 per litre in some parts of Canada in the coming months.
"This is the time of year when we usually see prices going up. It's just the seasonable nature of the product driven by a downturn in supply as a result of refiners undergoing seasonal maintenance," said Michael Ervin of M.J. Ervin & Associates, a Calgary firm that analyses retail gasoline price trends.
Ervin expects gasoline prices to rise to between $1.30 to $1.40 per litre this summer, depending on the location, while Jason Toews of Gasbuddy.com says he wouldn't be surprised to see gas hit $1.50 in some spots.
"We are seeing gas prices going up across most of the country," said Toews, whose consumer website tracks gas prices in Canada and the United States.
On Thursday, the larger increases at the pump appeared to be in Ontario, where prices rose by almost three cents in some cities, according to Gasbuddy.com.
The unofficial figures saw Toronto prices flip to around $1.12 per litre, up from $1.09 Wednesday, while London, Ont.'s price rolled ahead to $1.11 from $1.08.
Prices in Regina climbed to $1.19 from $1.18 on Wednesday, and went up to $1.13 from $1.12 in New Brunswick.
Prices remained steady at $1.18 in Halifax, $1.19 in Montreal and $1.14 in Calgary, while gas prices in Vancouver, Victoria and Newfoundland slid slightly to $1.20 down from $1.21.
Prices right across Canada are higher than they were a week ago.
Toews said gasoline prices tend to rise leading up to the May long weekend, then fall back slightly before rising again right before the Labour Day weekend.
The cycle is becoming more predictable and consumers are becoming more desensitized, Toews said.
"If gas prices went down to 99 cents again, people would be dancing in the streets, and taking big long road trips," Toews said.
The average price of gas across Canada Thursday was $1.141 per litre, just shy of $1.158 per litre reached the week of May 22, 2007, according to En-Pro, an Oshawa based energy consulting firm.
"Everyone is in sticker shock in Ontario with prices over $1.11," said Roger McNight, a petroleum cost adviser with En-Pro, but he said the price is fair with oil currently trading at about US$104 a barrel.
At this time last year, the cost of crude was about US$65 a barrel.
Oil prices jumped nearly $4 to US$104 a barrel on Wednesday - and stayed put Thursday - after the U.S. government reported a surprisingly large drop in gasoline supplies and an unexpected jump in demand for the fuel.
The report also showed that refiners are holding back on producing gasoline due to low refining profit margins.
The combination of low production and higher demand during peak summer driving season - along with high crude prices - is what is expected to boost gas prices even further into record territory.
Rising crude oil is the main reason behind soaring gas prices, because it is the primary ingredient in gasoline. Other factors that contribute to high gas prices include taxes, refining costs, and marketing/retail costs.
If crude is priced at US$105 a barrel, for example, the crude oil cost is about 66 cents per litre, given that there are about 160 litres per barrel, said Earl Sweet, an analyst at BMO Capital Markets.
He said taxes amount to another 35 cents per litre, depending on which province you live in, while marketing costs range from five to six cents.
"So, even with gasoline prices on the rise, this doesn't leave much left over for refiners' margins," Sweet said, adding that the normal refiner margin is about eight or nine cents per litre.
"Lately, refiners' margins have been squeezed by rising crude oil costs and ample gasoline inventories in North America. So, as you can see, the main story behind high gasoline prices is high oil prices and high taxes," Sweet said.
In Canada, the rising loonie has helped protect consumers from even higher prices, McNight of En-Pro said.
McNight said the best scenario a gasoline consumer could hope for this summer is a 95-cent US dollar, and crude falling to US$90 a barrel.
"That would bring the price down to about a dollar per litre," said McNight, although acknowledging it was unlikely.
But McNight said higher gas prices aren't the only worry for consumers.
Prices for jet fuel and diesel have also surged, which means higher costs for the transportation and airline industries. If prolonged, those increases will be passed on to the consumer in the form of higher travel costs and food prices.
"The consumer may wonder about high gas prices, but should worry about high diesel prices ... that is what's going to hit the table," said McNight.
People who watch gas prices for a living predict that the suffering at the pump will get worse before it gets better, with prices potentially reaching $1.50 per litre in some parts of Canada in the coming months.
"This is the time of year when we usually see prices going up. It's just the seasonable nature of the product driven by a downturn in supply as a result of refiners undergoing seasonal maintenance," said Michael Ervin of M.J. Ervin & Associates, a Calgary firm that analyses retail gasoline price trends.
Ervin expects gasoline prices to rise to between $1.30 to $1.40 per litre this summer, depending on the location, while Jason Toews of Gasbuddy.com says he wouldn't be surprised to see gas hit $1.50 in some spots.
"We are seeing gas prices going up across most of the country," said Toews, whose consumer website tracks gas prices in Canada and the United States.
On Thursday, the larger increases at the pump appeared to be in Ontario, where prices rose by almost three cents in some cities, according to Gasbuddy.com.
The unofficial figures saw Toronto prices flip to around $1.12 per litre, up from $1.09 Wednesday, while London, Ont.'s price rolled ahead to $1.11 from $1.08.
Prices in Regina climbed to $1.19 from $1.18 on Wednesday, and went up to $1.13 from $1.12 in New Brunswick.
Prices remained steady at $1.18 in Halifax, $1.19 in Montreal and $1.14 in Calgary, while gas prices in Vancouver, Victoria and Newfoundland slid slightly to $1.20 down from $1.21.
Prices right across Canada are higher than they were a week ago.
Toews said gasoline prices tend to rise leading up to the May long weekend, then fall back slightly before rising again right before the Labour Day weekend.
The cycle is becoming more predictable and consumers are becoming more desensitized, Toews said.
"If gas prices went down to 99 cents again, people would be dancing in the streets, and taking big long road trips," Toews said.
The average price of gas across Canada Thursday was $1.141 per litre, just shy of $1.158 per litre reached the week of May 22, 2007, according to En-Pro, an Oshawa based energy consulting firm.
"Everyone is in sticker shock in Ontario with prices over $1.11," said Roger McNight, a petroleum cost adviser with En-Pro, but he said the price is fair with oil currently trading at about US$104 a barrel.
At this time last year, the cost of crude was about US$65 a barrel.
Oil prices jumped nearly $4 to US$104 a barrel on Wednesday - and stayed put Thursday - after the U.S. government reported a surprisingly large drop in gasoline supplies and an unexpected jump in demand for the fuel.
The report also showed that refiners are holding back on producing gasoline due to low refining profit margins.
The combination of low production and higher demand during peak summer driving season - along with high crude prices - is what is expected to boost gas prices even further into record territory.
Rising crude oil is the main reason behind soaring gas prices, because it is the primary ingredient in gasoline. Other factors that contribute to high gas prices include taxes, refining costs, and marketing/retail costs.
If crude is priced at US$105 a barrel, for example, the crude oil cost is about 66 cents per litre, given that there are about 160 litres per barrel, said Earl Sweet, an analyst at BMO Capital Markets.
He said taxes amount to another 35 cents per litre, depending on which province you live in, while marketing costs range from five to six cents.
"So, even with gasoline prices on the rise, this doesn't leave much left over for refiners' margins," Sweet said, adding that the normal refiner margin is about eight or nine cents per litre.
"Lately, refiners' margins have been squeezed by rising crude oil costs and ample gasoline inventories in North America. So, as you can see, the main story behind high gasoline prices is high oil prices and high taxes," Sweet said.
In Canada, the rising loonie has helped protect consumers from even higher prices, McNight of En-Pro said.
McNight said the best scenario a gasoline consumer could hope for this summer is a 95-cent US dollar, and crude falling to US$90 a barrel.
"That would bring the price down to about a dollar per litre," said McNight, although acknowledging it was unlikely.
But McNight said higher gas prices aren't the only worry for consumers.
Prices for jet fuel and diesel have also surged, which means higher costs for the transportation and airline industries. If prolonged, those increases will be passed on to the consumer in the form of higher travel costs and food prices.
"The consumer may wonder about high gas prices, but should worry about high diesel prices ... that is what's going to hit the table," said McNight.
