Canada Gas Price Lows Could Lead To $12 Billion In Savings: Report

Slumping oil prices could save Canadians as much as $12 billion at the gas pumps this year.

But the lower cost is also very bad news for federal and provincial governments, which may have to cut spending in response to falling oil prices.

The Globe and Mail cited a report Friday by the London, Ont.-based Kent Group saying that Canadians could be on track to save $12 billion on gasoline if crude costs stay at their current levels.

The report noted that Canadians paid an average of about $1.28 per litre for unleaded gasoline in 2013, with prices dropping to 98.1 cents per litre at the end of this year.

If the latter price holds up, Canadian households could save about $25 per week, or even $1,200 per year, said CTV News.

Oil prices fell from over US$100 per barrel to under $60 this year as OPEC producers have refused to cut supply, the network said.

The organization may be keeping oil prices low in an effort to make producers in Canada, the U.S. and other countries reduce their own oil production, McMaster University business professor Marvin Ryder told CTV.

"Some of those operations may have layoffs, they may cut back on their employees, may not do as much exploration," he said. "That, in the long run, is better news for OPEC. So they may be prepared to take a hit short-term to cause a longer-term pain to the Canadian and American oil industries."

While low oil prices are not great news for producers, Dan McTeague, a former Liberal MP and now an analyst for Gasbuddy.com, says they could lead to the lowest cost of living that Canadians have seen in a decade.

"Canadians could well see an increase in their purchasing power as lower costs are passed on ultimately in the form of lower prices for goods and services," he told the Globe.

But Canada's economy could also take a hit from slumping oil costs, with an estimated 0.5 per cent expected to be shaved off the country's GDP, and about $10 to $13 billion out of government revenue.

That could blow holes in governments' budgets and force them to cut expenses, CTV News noted.

The Financial Post says nearly $60 billion in Canadian oil and gas projects could be put off over the next three years if oil prices stay where they are.