CALGARY - Gasoline prices in Canada could rise to about $1.40 a litre in a few months if oil prices stay at current record levels and demand picks up for the summer driving season, oil industry observers say.
Average Canadian gasoline prices were more or less steady at 111.60 cents per litre Wednesday according to the website GasBuddy.com.
But the cost of a barrel of oil surged to more than US$104 on energy markets Wednesday after OPEC said it would keep global production steady for the time being, despite U.S. calls to step it up. Investors who had also expected U.S. oil inventories to rise were also jolted by news that there was, in fact, a decline in crude stockpiles in the key American market.
Vince Lauerman, a global energy analyst with Geopolitics Central, said there is normally a lull in gasoline prices between the winter heating season and the summer driving season. Like many analysts, he said pump prices gould go as high as $1.40 a litre come summer should crude stay at its current levels.
Such a price would likely be a record for unleaded gas in Canada and surpass the $1.30 a litre level hit after the North American refinery shutdowns caused by hurricane Katrina more than two years ago.
Diesel prices are already at record levels, causing headaches across the North American trucking sector as companies pass on the increases to their customers.
"Refiners are starting to think about the summer driving season and it's only a matter of time before demand picks up for transportation fuels, particularly gasoline and diesel fuel," he said.
"And with that we should expect significantly higher prices than we're currently seeing.''
As for Alberta's oilpatch, companies already reporting fat profits because of high oil prices will continue to thrive with the price of crude setting new records, experts say. But Central Canada's squeezed manufacturing sector will be in for more suffering as the costs of producing and shipping everything from steel and auto parts to newsprint and machinery rises.
The rising cost of crude will further widen the gulf between Canada's oil-producing provinces and manufacturing heartland, said Derek Burleton a senior economist with the TD Bank Financial Group.
"It's good news for the oilpatch and for those provinces that are net exporters of oil. It certainly poses a challenge for the rest of the country, which imports the product," he said.
"In provinces like Alberta, you get the offset. It will support corporate profits in the oilpatch. Overall the region will continue to benefit."
But with high energy prices exacting a huge toll on the U.S. economy, Canadian oil producers might have trouble selling their energy south of the border down the line, he added.
The spike in oil prices could not come at a worse time for manufacturers in Ontario and Quebec, who have not only seen their costs rise but American demand fall.
"Earlier on in the decade when oil prices started to climb you had an offset from robust U.S. demand but the U.S. economy is now in a funk," Burleton said.
