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05/03/2021

Gas prices expected to rise

Expectations are that COVID weary families will take to the road this summer looking for some respite and drive gas prices forward.
man holding gas hose

When Canadians hit the roads this summer, they can expect gas prices to have risen as they pull cars out of the driveway for trips to the cottage. Kalibrate, a North American leader in fuel market intelligence, sees heightened demand and possible shortages at play in this summer’s gas pricing.

According to Kalibrate consultant Vijay Muralidharan, costs at the pump rise by .05 cents per litre for every billion dollars increase in crude pricing. Currently, demand, especially from a vaccinated U.S. population, is increasing. Here in Canada, expectations are that COVID weary families will take to the road this summer looking for some respite and drive gas prices forward.

Muralidharan suggests that while OPEC plans to increase supply to counter the upward price spiral, this move will take some time to alter the current market conditions. The result will be pain at the pump over the late spring and into the summer.

Another challenge could come from the closure of Line 5, the Enbridge facility that channels 540,000 barrels of Canadian crude through the US to refineries in southern Ontario. If this happens on May 12, as Michigan Governor Gretchen Whitmer says it will, fuel prices in Ontario and Quebec will skyrocket as supply is reduced. According to Enbridge, a closure would result in a shortfall of more than 14 million U.S. gallons in gas, diesel and jet fuel. Should this shutdown occur, rail shipping is an option. However, this would only pick up 10% of the slack.  The reduced supply would drive fuel prices further upward.

Already, Statistics Canada reports inflation is on the rise thanks in part to climbing gas prices. This past February Stats Can reported inflation climbed by more than 1% with gas prices up by 5% year-over-year. This news shows the third straight month of increases. The trend in higher prices at the pumps could push total annual inflation to 3% in April and higher as summer drivers take to the road.