Gasoline prices expected to increase further over Labour Day long weekend
Average Canadian gasoline prices are set to soar this weekend after already jumping nearly 10 cents per litre since Harvey roared ashore in Texas a week ago.
Analysts say the hikes will differ greatly by region, with Eastern Canada prices jumping by as much as nine cents per litre over the Labour Day long weekend and Western Canada prices remaining relatively stable.
Prices are expected to remain high until refineries on the U.S. Gulf Coast return to normal operation, the timing of which will remain unknown until flood waters recede and damage is assessed, they say.
“There was a five-cent jump at the pumps in Ontario today,” said Dan McTeague, a senior petroleum analyst for Gasbuddy.com, on Friday. “It went from $1.18 to $1.23 today and it’s going to $1.32 tomorrow, so a nine-cent increase.”
Meanwhile in Montreal, he said the price is expected to jump eight cents to as much as $1.42 per litre at some point over the weekend or early next week.
Gasbuddy.com reported a twocent hike in the average Canadian price on Friday to almost $1.18 per litre.
IHS Markit said in a report Friday about 3.6 million barrels per day of Gulf Coast refining capacity or 20 per cent of the U.S. total is off-line, with a further 1.8 million bpd or 10 per cent operating at reduced rates. It said outbound pipelines, including the 2.6 million bpd Colonial system to New York, are unable to source product from Houston, thus leading to surging fuel prices throughout the United States.
“Inventories are declining, wholesale prices are rising, and that will have an impact in Eastern Canada more than in Western Canada, just because of its proximity to that major market in the States,” said Kent Group senior vice-president Michael Ervin.
Some analysts have speculated that it could take months for the fuel market to return to normal, based on records from previous hurricane outages, but Ervin said it’s more likely to be a few weeks as it appears there’s been less damage to refineries and pipelines.
U.S. benchmark oil prices that fell below US$46 per barrel on Wednesday due to less demand from refineries have recovered to more than US$47 per barrel.
TD Securities analyst Bart Melek said in a note Friday he expects crude oil prices to strengthen to above US$50 per barrel before the end of September as Houston refineries, ocean import facilities and pipelines gradually return to normal operations.
Meanwhile, the U.S. has approved the release of 4.5 million barrels from the Strategic Petroleum Reserve in response to Harvey, more than tripling the amount announced Thursday.
Energy Secretary Rick Perry told Bloomberg Television he sees about a “two-week bump” in gasoline prices from the storm, which made landfall in Texas last Friday.
Inventories are declining, wholesale prices are rising, and that will have an impact in Eastern Canada ... because of its proximity to that major market in the States.