Bad news often travels in pairs as Canadian motorists will tell you. The weather has taken its toll on their driving habits over the past several weeks, and they are also facing rising gasoline prices. It’s almost enough to make drivers give up their vehicles completely.
Thanks to the brutal temperatures seen in the United States during February, gas production declined in those refineries which supply Canada, affecting the price at the pump.
Although oil prices remain below $50 a barrel in United States dollars, wholesale petroleum prices have risen on the continent. This price increase trickles down to the retail pump, and the 91.3 cents a litre seen on January 20, as reported by Natural Resources Canada, is history. They rose 13 percent between January 20 and February 22.
“Temporary shutdowns of many gas refineries due to cold weather in the United States northeast led to the price increase,” Dan McTeague, a Canadian and U.S. gas price expert, explains. “Oil remains plentiful, yet certain markets find they are short on gas.” McTeague helps operate GasBuddy.com, a popular price tracking site for consumers.
“Many refineries have been stopped in their tracks thanks to bad weather, and these refineries need oil to make gas,” McTeague continues. He’s referring to a facility located near Philadelphia that handles 300,000 barrels of oil every day which has been offline thanks to inclement weather.
McTeague states unseasonably cold temperatures have done more than close facilities. The weather also creates logjams in rivers leading to certain facilities. When a river freezes, barges can’t get through to bring the necessary supplies.
Compounding the problem, refineries often tackle maintenance duties during this period in preparation for the move to summertime petroleum. Processes change up during the maintenance phase, as additives must be added to mitigate emissions.
“All combined work to increase the price one pays at the pump in Canada,” McTeague states.” Other factors contribute, however, and drivers need to be aware of those as well.”
The Canadian dollar continues to weaken, dropping an additional 5.5 percent in the previous few weeks against the United States dollar. This contributes to increased fuel costs.
Add to this government taxes, which are based on a fixed percentage of the price of gas pre-tax. When gas goes up $0.10 cents, the tax adds an additional 1.5 cent on each litre.
A weak dollar and higher tax are only two factors affecting the price drivers pay for gas. Profit margins are being inflated again by gas distributors. “The recent gas war brought prices down,” McTeague points out. “Thanks to tightening supplies, the suppliers are boosting prices once again.”
Motorists are sure to be disappointed when looking at the North American wholesale gasoline futures market. Prices aren’t going down again any time soon. In fact, expect to see a six to seven percent increase in price per litre over the coming weeks. The cold weather appears to be here to stay and this means more at the pump for all.