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Gas prices have jumped close to the 80-cent-per-litre range at many stations in Regina — and that’s where one analyst says they should be.
Roger McKnight, the chief petroleum analyst at En-Pro International, said Wednesday that the recent run of prices under 70 cents per litre was a blip on the radar.
“That’s called a price war,” McKnight said. “In the 60s, they’re losing their shirts. Retailers are losing their shirt and oil companies are losing their shirt. The only people that are maintaining any sort of financial security are your federal and provincial governments because they are basically doing nothing and getting paid for it.”
The price of gas took a huge dive in recent weeks in response to a historic drop in the cost of crude oil. The fact that people are staying home due to COVID-19 also has contributed since the demand for gasoline has plummeted.
“In 14 of the last 15 years, this is the time of year when prices reach their absolute highest because it’s the start of the so-called ‘driving season’ just around the corner at the end of May,” McKnight said. “That hasn’t happened this year.”
He pointed out that while oil companies normally regulate the market and control their bottom lines, “you can’t control demand when the thing that’s affecting demand is invisible.”
McKnight noted that gasoline currently is 10 cents per litre cheaper than diesel, an equation that he noted should be the other way around.
The price of gas has started to creep up, but it’s still well below what it was before the pandemic started. McKnight doesn’t expect the price at the pump to rise significantly anytime soon.
“Until demand comes back from both the private consumer and heavy industry, then prices should remain low,” he said. “I can’t see any increase in prices until such time as the oil companies have to start shutting down refineries, which could be right around the corner.”
Even with provinces announcing plans to allow shuttered businesses to restart, McKnight thinks the price of gas will remain lower than its pre-pandemic level.
“If (governments) are going to gradually reopen the economy — which is ridiculous — that will in theory increase demand for consumer products and get people back to work,” McKnight said. “But I think we’re a long way from that right now.
“Our problem right now is there’s so much oil on the market, there’s nowhere to store it. There’s so much oil on the market, the refineries can’t even use it because nobody’s buying the gasoline or diesel that the refineries are asked to (make) with the crude.”
— With files from 980 CJME’s Joseph Ho
