Petro Canada gas station in Lethbridge on May 4, 2020. (Lethbridge News Now)

By David Opinko

Gas prices will fluctuate in conjunction with reopening economies: GasBuddy

May 4, 2020 | 11:26 AM

LETHBRIDGE, AB – Drivers in Lethbridge likely noticed a sharp increase in gasoline prices last week.

Early last week, fuel analyst company GasBuddy reported that gas stations in the city were charging an average of 69.9 cents per litre for regular gas. In just one day, that rose to 84.9 cents per litre.

Head of Petroleum Analysis Patrick De Haan says there are two major factors for this.

Refineries had drastically cut production in response to more people staying at home and spending less time on the road due to COVID-19 restrictions.

The other part is that many provinces and American states have recently started to loosen these restrictions, such as Alberta through the phased Economic Relaunch Strategy. This has lead to the demand for fuel beginning to rise.

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“That’s Economics 101 that, if demand plunges, prices will likely go along with it, and if demand goes up, so will prices. Indeed, gas prices are very much tied to the future with an improving situation leading to higher prices.”

While Alberta could see more businesses, such as retail stores, hair stylists, daycares, and museums reopen as early as May 14, De Haan sees gas prices staying relatively flat in the short term with minimal growth after last week’s initial jump.

“The price of oil jumped 42 per cent last week, so there may be a little bit of an increase in gas prices that’s yet to come.”

As far as a longer-term forecast, he says that is even tougher than normal to predict.

According to De Haan, we will have to wait and see how oil refineries respond to the changing economic conditions in the weeks and months ahead.

“Will they increase gasoline production, which would lead to an increase in gasoline inventories, or will they continue to hold a tight rope on production, and thus, cause gasoline inventories to decline? That’s really the defining moment here.”

The final deciding factor in the cost of gas going forward is the ongoing price war between Saudi Arabia and Russia.

On April 12, officials with the Organization of Petroleum Exporting Countries (OPEC) agreed to cut their global production of oil by 9.7 million barrels per day for May and June.

“We’ll have to see, with data coming out perhaps in the next few weeks, if OPEC countries, if Saudi Arabia, if Russia are abiding by those agreements.”

The average gas price in the province, as of May 4, 2020, was 79.2 cents per litre.

For the time being, drivers are still being charged significantly less than last year’s average of 125.9 cents per litre.

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