Helping economic recovery, the price of gasoline has skyrocketed in recent times, and especially in recent weeks.
The cost of fuel has been on an upward curve since October 2020, after having hit a low at the start of the pandemic which had even tilted the price of certain oil supply contracts into the negative. But the increase in prices has accelerated even further since last August, despite the latter being already well above pre-pandemic averages.
“We have thirsty consumers of gasoline and diesel. We think we have transport electrification, but this is not true; we have an addition of electric vehicles in a gasoline fleet that continues to grow. There is therefore even enthusiasm for petroleum products that manifests itself at the pump, ”explains Pierre-Olivier Pineau, holder of the Chair in Energy Sector Management at HEC Montréal.
Across Canada, the weighted average retail price of regular gasoline hit a record high last week, according to Kalibrate, which has been collecting data since 2007, with a liter of regular gasoline at $ 1.45 . This corresponds to an increase of more than $ 0.40 compared to the same date last year.
These fluctuations can of course be explained by an increase in demand, but also by a decrease in supply. Since the price of oil fell along with displacement during the emergence of COVID-19, much less investment has been made in oil exploration and projects. “We end up with a short-term lack of diversity in the supply and in the production capacities of oil, which gives power to producers to increase prices,” explains Professor Pineau.
We also see upward pressure on the refining side, notes the expert. Since the beginning of the 2000s, the market has consolidated on a global scale for questions of profitability; it is now made up of larger players, who thus have more leeway in setting prices.
From one gas station to another
Prices vary globally, of course, but also locally. In Montreal, for example, several reasons specific to the metropolis can explain part of this increase in the bill at the pump.
First, the city imposes a tax of 3 ¢ per liter of gasoline to finance public transit. There is also less enthusiasm for petroleum products; distributors must then compensate for the lack of volume by increasing prices. And, finally, the operating costs are higher there than for distributors located outside the metropolis.
The level of competition also plays a role in pricing. When motorists are richer and there is congestion, they do not tend to travel to a service station further away which would have a better price. “Montrealers generally don’t want to drive half an hour to save a cent per liter. In the regions, people travel more kilometers, so they can stop at a gas station on their way. They are therefore more inclined to shop, ”explains Professor Pierre-Olivier Pineau.
A harsh winter in perspective
The prices of different types of energy are expected to be very high this winter, according to the expert. The world is currently experiencing a natural gas supply crisis, which is pushing its price up, but also the price of its alternatives, including oil.
The supply may therefore be insufficient to meet the demand for the coming months, believes the economist. “There will also be no saviors, new oil producers who will appear in the coming months to produce more oil,” he adds.
Professor Pineau believes, however, that demand could calm down in the medium to long term if some motorists choose to turn to other options, such as public transport or the electric car, for example.
With The Canadian Press