LOWER, WITH A CHANCE OF SAVINGS
The summer gas price forecast is in and it’s a good one: We’ll pay less at the pumps than we have in four years.
Canadians planning to explore the country during their summer holidays will get relief at the pumps, thanks to the gasoline prices that are expected to be the cheapest in five years.
“In Canada, it’s very likely we will see the lowest gas prices since 2010, maybe not as a low as 2010, but certainly lower than the prices in 2011,” said Julia Kent, a spokeswoman with the Canadian Automobile Association.
In July 2010, regular unleaded gasoline in Toronto was selling for $1.03 a litre, compared with $1.29 a litre in July 2011, according to Statistics Canada. Last July, gasoline was selling at $1.36 a litre.
However, it is unlikely drivers will see the prices of July 2009, when gas was 93.9 cents a litre.
The CAA thinks Canadians will do more driving this summer, but will probably stay closer to home instead going to the United States.
“The Canadian dollar is declining in value, and the lower price of gasoline at home would keep them at home,” Kent said.
The U.S. Energy Department is forecasting the lowest summer gas prices in six years, an average of $2.45 (U.S.) a gallon, down from $3.59 a gallon a year earlier.
During the summer, U.S. drivers are expected to consume slightly more gasoline, a 1.6 per cent increase. But gasoline expenditures by U.S. household are expected to be the lowest since 2004, with people spending about $700 less on gasoline in 2015 compared with a year earlier.
Economist Mike Moffatt says that if gasoline prices stay where they are now, it will bring an $800 to $1,000 savings this year to the average Canadian family.
“It does put more in people’s pockets,” he said. “They might drive more, save it or spend it.”
Moffatt, an assistant professor at the Ivey School of Business, says even if consumers use the savings to pay down debt, it has stimulative effect on the overall economy.
“If they deposit in the bank, the bank is more likely to loan the money out,” he said.
Canada’s National Energy Board no longer does short-term outlooks on gas prices.
Ontario’s energy ministry also does not offer forecasts, but gasoline prices usually rise in the spring, said Spencer Knipping, an oil adviser with the ministry.
He attributes the price change, in part, to scheduled maintenance at refineries, which means they produce less gasoline, putting upward pressure on wholesale prices.
Refineries are also switching from winter-grade to summer-grade gasoline, which is a little more expensive to make.
“And in the spring, as the weather gets warmer, people start to drive more,” Knipping said, adding that does push up demand and prices.
Heading into the summer, analysts believe oil prices will remain low, in part because of growing crude inventories.
“I would expect for the remainder of this year, that we are not likely to see crude oil prices go up by much more than perhaps $10 a barrel,” said Michael Ervin, president of MJ Ervin and Associates, a petroleum industry consultancy.
“Trend-wise, I don’t expect we’re going to see a significant increase in fuel prices. Where they are now generally reflects an already seasonal increase in gasoline price,” he said, noting that more people drive in the summer.
“People sometimes lose sight of the fact that in addition to the price of crude, wholesale gasoline, much like crude oil, is a commodity,” he said. “Its supply and demand balance is going to have an effect on the pump.”
However, Ervin added that he doesn’t expect pump prices to go down, and there may be a modest rise.
West Texas Intermediate oil for May delivery increased $1.84 (U.S.) to close at $53.98 a barrel on the New York Mercantile Exchange. It’s the highest settlement since Dec. 30.