The price of gasoline across the country is set to fall by roughly seven cents a litre on Wednesday, as the impact of the unprecedented plunge in oil prices filters down to the gas pump.
Oil sold off sharply on Monday after Saudi Arabia kicked off a price war, announcing to the world that the country would pump as much crude as it wanted to, which began a race to the bottom for producers desperate to gobble up as much market share as they could at fire-sale prices.
The benchmark North American oil blend known as West Texas Intermediate was down by 20 per cent around midday on Monday, after earlier having been down by even more.
Crude oil is always one of the most important factors that determines the price of gasoline at the retail level — and that influence is even larger than usual this time around. Under normal circumstances, every $1 drop in the price of crude works out to a drop of about 0.6 cents at the gas pump, said Roger McKnight, chief petroleum analyst with En-Pro International Inc.
The European oil benchmark known as Brent Crude fell by more than $9 on Monday, which McKnight says should lead to a drop of about six or seven cents a litre for Canadians filling up by Wednesday.
Normally the price of gasoline varies wildly across the country, from high prices in British Columbia, to comparatively lower ones in Quebec. While those relative levels will stay the same, McKnight expects the pump-price drop to move in almost perfect harmony.
“You’ll see seven cents a litre right across the country,” he said.
It won’t happen until Wednesday, McKnight noted, because there is always at least a one day delay as the impact of events upstream in the process filter down.
“They’ll figure it out today,” he said. “The wholesale price will be announced tomorrow,” and drivers filling up at stations should see it after that.
U.S. gasoline will be even cheaper
The pump-price discount should actually be even greater, says Dan McTeague, president of Canadians for Affordable Energy, but Canadians are being punished as they so often are by foreign exchange impacts behind the scenes.
McTeague sees a scenario in which the price of gasoline falls by as much as 25 or 30 cents US per gallon. All things being equal, that should translate to about eight or nine cents a litre in Canada, he said, but the weakness in Canada’s currency will whittle away some of those savings.
That’s because while Canada exports crude oil, it imports a lot of its gasoline from U.S. refiners, who are happy to sell to the highest bidder. And anyone in Canada wanting to import gasoline from the U.S. has much lower purchasing power on Monday morning, because the loonie lost more than a cent as the price of crude sold off.
“It means although we should be getting cheaper prices, it won’t be as much as our competitors in the U.S. will see,” said McTeague. “The bottom literally is falling out of the market.”