RELIEF AT THE PUMP

Expert predicts price will drop

One oil industry analyst predicts the pain at the province’s gas pumps will ease by the weekend.

On Wednesday, gas prices at many stations across Saskatchewan spiked by 10 cents to more than $1.30 per litre.

“This is mostly owing to the fact that a week ago oil prices shot up $9 a barrel,” said Dan McTeague, a senior petroleum analyst with gasbuddy.com.

Oil was at $65 a barrel around June 22, but jumped to $74 a barrel last week.

“Gas stations already got the notice that their wholesale prices had gone up, their replacement costs were at least five cents more, but they stubbornly refused to pass those on,” McTeague said. “Their concern was that, ‘We’re not dealing with the higher prices going into the long weekend.’ ”

Early Thursday afternoon, some stations in Regina and Saskatoon were offering gas for less than $1.21 per litre, according to gasbuddy. com.

“It’s costing a gas station $1.21 to buy their fuel — how can they sell it for $1.13?” McTeague asked.

“The fact is that many of them are in a cutthroat competition, trying to compete with big box stores and are using gasoline as a loss leader.”

The surge in gas prices is fuelled by multiple factors, he said.

The Syncrude facility in Fort McMurray had been pumping 380,000 barrels a day, but the project ran into electrical problems, which impacted production and diminished inventory in the U.S.

“At the same time, OPEC got together with Russia, and a few others, a week ago Friday and said, ‘ We’re going to increase our output by 600,000 barrels,’ ” McTeague said. “That’s not enough. World demand for oil is up 1.3-1.5 million barrels a day. That’s a shortfall and that’s what caused oil to spike and that’s what caused gasoline prices to spike.”

He maintains motorists should have seen higher prices at the pump much sooner and “perhaps more gradually.”

“Instead, gas stations took the brunt, absorbed the hit and then realized at the last second that, ‘We’re selling gasoline at a price that is lower than what it is costing us to replace,’ ” McTeague said.

Even with the increase, gas prices in Saskatchewan are among the cheapest in the country. Vancouver residents are paying around $1.60 a litre. In Calgary the perlitre price is just under $1.40, in Montreal it’s $1.45 and Winnipeg residents are paying around the same as in Saskatchewan.

McTeague expects residents will see a five-cent correction in July.

“What goes up in Saskatchewan must come down,” he said. “Retailers are already starting to throw away that 10- to 12-cent retail margin, which is what caused the spike. They’re likely to push it down to $1.25 by Sunday.

“If you don’t like the price in Saskatchewan, wait. It’s like the weather.”