Thursday October 16, 2014
By Graeme MacKay, The Hamilton Spectator – Thursday October 16, 2014
Gas prices at 5-year low and dropping
The pain oil producers feel with oil prices hovering just above $80 a barrel is a bonus for consumers filling up at the gas pump.
Gasoline prices are at a five-year low in Canada, leaving more money in consumers’ pockets.
Prices have dropped to the $1.11 a litre level in some parts of Ontario, as low as $1.03 in Edmonton, $1.25 in Vancouver and $1.22 in St. John`s, a sharp price drop from the early summer. The Canadian average was about $1.23, according to Roger McKnight, an analyst with En-Pro International.
The price will fall even lower in most parts of Canada over the coming weeks, said Dan McTeague, who analyzes oil and gas prices at tomorrowsgaspricetoday.com.
McKnight agrees. “I could see it [crude] going down another $6 a barrel for WTI and that would translate into another three cents per litre [at the pumps] within the next 30 days,” he said.
McTeague said years of speculation drove world oil prices to $147 US a barrel in 2008 and $115 US this June at the time when ISIS seemed to be threatening supply in Syria.
But now there is a worldwide glut of oil.
“The reality is now setting in that crude has no floor, and as any other commodity, when the supply is high and the demand is low, prices have nowhere to go but down,” he told CBC News.
The shale oil boom in the U.S. has resulted in strong supply in North America and Saudi Arabia signalled last week that it would continue to pump oil and sell it at $80 a barrel, rather than manage its supply. That’s a 30 per cent drop since June.
And waning international growth has led to a drop in demand for crude.
West Texas Intermediate, the main oil contract traded in New York, is selling at $81.78 US a barrel today, and Western Canada Select, the price paid to many Canadian producers, is at $68.98 US.
Finance Minister Joe Oliver acknowledged the hit against Canadian producers, who may soon have to cut back on investment in new production.
“There will be implications for some companies, on the other hand, Canadian consumers can benefit from lower prices,” he said in a news conference Tuesday. (Source: CBC News)