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July 08, 2021 - 7:30 AM
There are strange things going on in the world of crude oil trading that may give Kamloops and Okanagan consumers a bit of a short-term break at the gas pumps.
“The market is very skittish right now,” Dan McTeague, president of Canadians for Affordable Energy, told iNFOnews.ca Wednesday, July 7.
The price of crude oil dropped $5 U.S. a barrel, he said.
That means the price of gasoline at the pumps in the Thompson-Okanagan – which all comes from Alberta through Kamloops – should drop two to four cents over the next few days.
That may be good news for consumers in the short term but the reality McTeague sees is that is likely to change dramatically in the other direction soon.
“I’m seeing this as a bit of a counterintuitive move by markets to drop oil prices at a time when supply is not meeting demand by any stretch of economic measure,” he said. “That’s going to set us up in the next few weeks for some pretty serious upward adjustments in oil and, ultimately, in gasoline prices.”
U.S. oil reserve volumes have declined for an unprecedented seventh week in a row as the continent can’t keep up with demand because of things like pipelines not getting built, McTeague said.
That shortage will be exacerbated as world travel picks up. Aviation fuel is made from diesel so refineries will be switching more of their production away from gasoline and into diesel, he said.
At the same time, the Organization of the Petroleum Exporting Countries (OPEC) has failed to reach an agreement on increasing supplies.
Yet, the price of oil is falling, meaning fewer people are inclined to put more product on the market, McTeague said.
That should quickly translate to the price falling at the pump in the Thompson and Okanagan regions where drivers are already getting a pretty good deal, despite the high cost of gasoline, McTeague said.
At current prices, gasoline is costing retailers about $1.37 per litre once the price of oil and taxes are factored in.
It’s selling at $1.40.9 to $1.43.9 per litre at most gas stations in the region. That means retailers are only earning four to six cents a litre. But they also have to pay two cents per litre to credit card companies on most sales.
Retailers normally make seven to 12 cents a litre, McTeague said.
The Tempo gas station in Enderby is listed on Gas Buddy as selling regular gas for $1.37.9 Wednesday, meaning they’re making no money on their gas.
“They’re giving gasoline away at the price for which they’re purchasing it,” McTeague said. “They either have a good deal with their supplier or they’re selling a lot of potato chips and beef jerky.”
It is possible that, given the tiny profit margins for gas stations in the region, retailers might opt to leave prices where they are in order to increase their profits. McTeague doesn’t think they will risk the backlash of keeping prices high as crude costs go down but, that remains to be seen in the coming days.
He has no way of knowing how long it will take for the crude price trend to reverse but suspects significant increases are ahead.
For those contemplating a drive to the Lower Mainland, gas prices are still about 30 cents a litre higher.
That’s due to a refinery in Washington State having production problems and the main pipeline coming from the U.S. is down for annual maintenance.
READ MORE: Getting gas will cost more in Lower Mainland this weekend; put off that road trip
If both of those come on line, the prices in the Lower Mainland should moderate significantly, he said.
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