Canadian motorists will have the unpleasant surprise of seeing an increase of 10 cents per liter of gasoline at their next stop at the gas station. The impact of Hurricane Harvey in the southern United States is the reason, according to economists.
The price per liter of gasoline rose from $1.16 Monday in the Montreal area to $1.27 on Tuesday before reaching $ 1.35 on Friday morning.
GasBuddy Analyst, Dan McTeague, said there may be further increases over the next few days.
The price of gasoline at the pump could reach $1.45 per liter in the Montreal area.
Although prices were lower than in the Montreal region, prices rose by about 10 cents per liter in the Quebec / Chaudière-Appalaches regions ($ 1.25 per liter), Bas-Saint-Laurent (1, $ 24) and Sherbrooke ($ 1.21).
The price at the pump remained at $1.04 in the Outaouais, which has not yet been hit by the increases. The GasBuddy specialty site is priced below $1.10 a liter in Ottawa, less than $ 1.08 in Toronto and less than $ 0.97 in Calgary.
A refining problem
Hurricane Harvey forced fifteen refineries – one fifth of American refineries – to shut down production, creating fuel shortages and driving up prices at the pump.
Refineries in the southern United States account for 45% of the refining capacity in the United States and about 20% to 25% of US refineries are affected by a slowdown in production.
The rise in the price of gasoline is all the more difficult to accept for consumers as the price of a barrel of crude fell on Thursday
“People forget that the relationship between raw material, crude oil, and the price of gasoline at the pump, often there are none,” says the oil industry spokesman, Carol Montreuil. No one should lack crude oil.
“The problem is that the refineries that produce the finished products have the problem,” says the vice-president of the Canadian Fuel Association. “So you could have all the crude oil available, but if you do not have refineries to turn it into products, you’re going to create a problem. ”
Speculative markets, which manage gasoline transactions, are also coming to the crisis created by the industry’s refining difficulties and they do not expect its real impact to raise prices, adds Montreuil. This is why price increases at the pump occur faster than the actual moment when the effects of the refining crisis begin to be felt.
Fuel distribution is also affected by the floods following the Harvey Passage, which is also putting upward pressure on its price.
The price of a barrel of crude oil for delivery in October also rose US $1.27 on Thursday, closing in New York, reaching US $47.23.
Some retailers may also take advantage of the gasoline price jump at wholesalers to increase their own profit margin, according to Mr. McTeague of GasBuddy.
US motorists will also pay the price for the consequences of Hurricane Harvey, according to the Financial Times . The price of gasoline could increase by 20 cents per liter over the next few days in our neighbors to the south. GasBuddy’s oil industry analyst Patrick DeHaan told the Financial Times that the average price at the pump has risen by 3 cents per gallon.
In the Dallas area, motorists also have to line up to fill up due to fuel shortages.
NAFTA or the Single Market
In addition to the problems of refining, Mr. Montreuil also argues that the North American Free Trade Agreement (NAFTA) has a role to play in the price of gasoline.
“It’s a brutal reminder that people are seeing how open the borders are and how much the North American market is a single market,” said Mr. Montreuil in an interview with CBC Radio.
Everything is connected. Because of the NAFTA, products circulate freely and when there is a jolt in one place, unfortunately, we feel the effects of it all over the place.
Although gasoline produced by refineries in the Gulf of Mexico is not sold in Quebec, Montreuil argues that all prices are related.
“So all this jolt, which is found even on the east coast, even though it is far from the Gulf of Mexico, it affects what is called the commodity market – the commodity market of New York – and when that Whether it’s a refinery in Quebec City or Montreal or Ontario, prices are consistently the same, he says. When these problems happen, it immediately affects the greatness of America. ”
Ironically, rising oil prices and the performance of the Canadian economy led to the Canadian dollar rising on Thursday. As a result, Canadians traveling to the United States for the long Labor Day weekend will benefit from a nearly one-cent increase in the Canadian dollar against the US dollar.