Canada Gas Prices To Head Downward

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GAS PRICES CANADA
Gasoline prices are expected to drop again Friday after a big spike at the pumps earlier this week. (THE CANADIAN PRESS/Nathan Denette) | CP

OTTAWA - Pump-panicked motorists in Canada might be breathing a little easier after this week's sudden spike in gasoline prices — but experts fear price shocks will continue in coming days as commodity traders speculate about economic stimulus south of the border.

The cost of a litre of gas was expected to drop significantly after Wednesday's jarring increase, according to tomorrowsgaspricestoday.com, a consumer-oriented website that monitors changes in fuel prices.

Pump prices were expected to fall by anywhere from five to seven cents per litre early Friday, depending on the region, said Dan McTeague, a former Liberal MP and longtime gas-price watchdog who operates the website.

Wednesday's increase was the result of little more than energy-producer price gouging, McTeague declared, noting that producers are likely to back off because there's nothing to justify the jump.

"The rapid rise without much explanation had more to do with profit-making by Canada's major oil companies, who constitute a veritable monopoly," McTeague said.

"(They) were clearly jumping the gun on what news might have been developing in the United States with an anticipated decision by the U.S. Federal Reserve."

In fact, the Fed did move Thursday, unleashing a series of open-ended actions designed to make it cheaper for consumers and businesses to borrow and spend.

The central bank will spend $40 billion US each month to buy mortgage-backed securities for as long as it deems necessary. It also signalled plans to keep short-term interest at record lows through mid-2015, and to take other unconventional steps if job growth doesn't pick up.

Gasoline markets reacted by moving slightly lower while oil and the Canadian dollar gained value. A higher loonie, in theory, could result in lower prices for oil-based products such as gasoline, since oil is priced in US dollars.

But consumers should brace for more price shocks in coming days, thanks to continued speculation about the strength of the U.S. and European economies.

Gasoline prices shot up as much as 13 cents in Montreal on Wednesday to a high of $1.53 per litre, although they dropped back a few cents by Thursday.

There were smaller price increases elsewhere Wednesday, including a spike of 3.4 cents a litre in Toronto, where prices averaged 136.8 cents a litre.

Aside from speculators playing with the market, McTeague warned, the real concern is a serious lack of refining capacity that could create a fuel shortage, especially in eastern Canada.

"I'm not just worried about price increases, which we saw without justification this week," he said.

"I'm now concerned about the real scenario in eastern Canada and in some parts of the Prairies that we're going to wind up with shortages and a crisis as far as supply is concerned, both for diesel and gasoline."

Some analysts say what could mitigate the potential for shortages is an increase in refining capacity, and a national energy strategy.

University of Ottawa professor Jean-Thomas Bernard isn't so sure. He predicted gasoline prices — while volatile in the short term — shouldn't go up dramatically in the next few years, barring a significant event such as war in Iran.

The real driver of gasoline prices, he said, is consumption of oil in China and the United States. While growth in the Chinese economy is slowing, increased automotive efficiency and other factors mean consumption is also dropping in the U.S., which should put the brakes on the price of oil, said Bernard.

"Just a few years ago (Americans) were consuming about 20 million barrels a day. Now they are down to slightly more than 18 million," he explained.

"That's a huge drop, two million barrels a day."

Bank of Canada governor Mark Carney made clear his views on the issue last week, suggesting in a speech that consumers and business would benefit if governments and industry build better energy infrastructure.

"New . . . pipelines and refineries could bring more of the benefits of the commodity boom to more of the country," Carney told a conference of business leaders and international policy-makers in Calgary.

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