Consumers becoming desensitized to gas price jumps
CALGARY—The co-founder of a popular gas price-tracking website says consumers are becoming increasingly desensitized to wild swings at the pump—like the 13-cent wallop Montrealers experienced earlier this week.
Gasbuddy.com’s Jason Toews recalls Canadians being “on the edge of revolt” in 2005, when the damage wrought by Hurricane Katrina rippled north of the border and sent the national average to a then-record of $1.23 per litre.
“Ironically enough, it doesn’t seem that expensive anymore—$1.23. That’s kind of the new norm.”
The national average for gasoline sat at $1.33 per litre yesterday and early today. Toews said he expects it to dip into the $1.20 per litre range by December.
Gasbuddy.com showed that several Ontario cities saw significant price decreases early today, based on sightings by consumers that share their observations on the website.
Toronto showed a five-cent decline to just under $1.31 per litre, Ottawa’s was down nearly five cents to $1.28, Hamilton’s was down about four cents to $1.31.
London, Kitchener-Waterloo and Barrie, Ont. also showed declines of between two and three-cents per litre with prices in the $1.31 to $1.33 per litre range.
Nationally, however, Halifax showed an increase of about four cents to nearly $1.43 per litre and Vancouver’s was up 1.24 cents a litre to just under $1.34.
Toews said Canadians have a different perspective on gasoline prices these days.
“In 2005 we would have cancelled a trip to the lake because of high gas prices. Today we don’t cancel that trip.”
Canadian drivers enjoyed relatively flat prices during the summer, a time of year when road trips or weekends at the cottage typically drive up fuel demand, said Toews.
As fall settles in, prices tend to settle down.
But this time, Toews said, Hurricane Isaac caused Gulf Coast refiners to shutter some of their facilities, causing a domino effect that ultimately hit Canadian markets.
Gasoline prices shot up as much as 13 cents in Montreal on Wednesday to a high of $1.53 per litre, although they dropped back a few cents by yesterday.
The Montral price on Gasbuddy.com early today was between $1.47 and $1.48 a litre.
There were smaller price increases elsewhere Wednesday, including a spike of 3.4 cents a litre in Toronto where prices averaged $1.37 a litre.
Roger McKnight, senior petroleum adviser with En-Pro International, said he expected prices to drop today—to the tune of 6.4 cents in Montreal and 6.2 cents in southern Ontario.
He expected Western Canada to have expect a one-cent increase.
He said he can see no compelling reason for the price increase earlier in the week, other than a “grab” by oil companies to pad their profit margins.
“There’s no problem with inventories, no problem with refineries that I know of. There’s no problems with pipelines. It’s the shoulder period for demand, therefore gasoline demand should be down,” he said.
From October until March, gasoline prices tend to track prices of distillates, such as diesel and heating oil, said McKnight.
“The distillate inventories are below the five-year average, therefore I can’t see a tremendous drop in gasoline prices,” he said.
Political instability in the Middle East is the big wild card. Although oil production disruptions in countries such as Libya don’t have any direct implications for Canadian supplies, speculators’ reactions to those events do.
“Everything’s hinging on this geopolitical situation,” he said. “So I think the speculators are just going to go a little bit nutso trying to figure that out.”
Speculators have also been watching economic stimulus moves south of the border.
Yesterday, the Federal Reserve unleashed a series of open-ended actions designed to make it cheaper for consumers and businesses to borrow and spend.
The Fed said it will spend US$40 billion each month to buy mortgage-backed securities for as long as it deems necessary.
It also signalled plans to keep short-term interest at record lows through mid-2015 and that it was prepared to take other unconventional steps if job growth doesn’t pick up.
“What will happen then is the U.S. dollar will drop in value, the price of crude will go up. That will raise the price of gasoline,” said McKnight.