It’s not just you: Gas prices are much higher than they should be, energy experts say
Gas prices are up by more than a third since the start of the year, a figure much higher than one would expect based on the slight rebound in oil prices, Bank of Montreal’s chief economist says.
Doug Porter noted Thursday that while everything connected to crude oil has looked execrable since the slowdown that started last fall, Canadian gas prices have been especially loopy because of the impact of the Canadian dollar.
A lot of the gasoline used in Canada is refined and processed in the U.S., where refineries price the base commodity in U.S. dollars. That makes Canadian pump prices doubly sensitive because they are heavily impacted by the value of the Canadian dollar.
If you balance out the impact of currency fluctuations, “converting oil prices into Canadian-dollar suggests that the jump in gasoline has gone way beyond the move in crude,” Porter wrote. “So what’s up?”
It’s a question many Canadians have been asking themselves, with the average price of a litre of gasoline at $1.20 across the country. Porter noted there are indeed plenty of valid reasons for gas prices to be up a bit. In addition to the small rebound in crude oil, there are seasonal factors at play.
“In each of the past two years, the annual highs for gasoline prices were hit in the fourth week of June,” Porter said. We are right on track for that to happen again this year.
Demand is up
And demand for gasoline is legitimately higher too. Phil Flynn, the senior market analyst at energy research firm Price Futures Group in Chicago, said cheap oil prices last fall compelled most Americans to do what they normally do when that happens — drive more. “When oil prices crashed it stirred demand,” he said in an interview. “It’s the oldest story in the market.”
…click on the above link to read the rest of the article…
