US market behind gas hikes

Facundo Rodriguez
frodriguez@maplecreeknews.com

You may have noticed gas prices have been on a rollercoaster ride these past few months.
Most gas prices this week in and around Maple Creek sat at 116.9 cents per litre, and for those who found themselves in Medicine Hat, most stations read an average of 123.4. Those prices are a far cry from what we were used to seeing — last month pumps were reading an average of 97.2 cents while this time last year, a comfortable 90.1 was the norm.
According to Dan McTeague, a senior petroleum analyst with GasBuddy.com, we need to look at what is happening in the United States to understand why prices are the way they are.
Hurricane Harvey was the first culprit of gas price hikes. Labour Day weekend brought with it an average six- to seven-cent increase. Delay of maintenance in two refineries because of Hurricane Harvey is also adding to the jumps, not to mention fuel demand in the U.S is up as the economy is experiencing a boost. A shutdown of a major pipeline known as “The Explorer” after the pipes burst, which has since been fixed, sent gas prices up 60 cents a gallon.
“What happens just south of the border has a direct impact us on,” McTeague said. “Those situations are responsible for the average 15-cent increase we’ve seen across the board.”
While most of the gas in Saskatchewan stations comes from the province’s Co-op Refinery Complex, all of Canada uses global pricing benchmarks to determine the price. For example, the price of gas is set by the Chicago spot market, which experienced a jump of 50 cents per gallon toward the end of October. Though it has since dropped, uncertainty by Canadian refiners has resulted in an added premium to fuel.
“It looks like Canadian refiners are a little frightened by what’s happening on the Chicago spot market, and so an additional seven cents a litre are being applied to gas prices as a premium,”said McTeague. “Normally I see an increase of two or three cents, but never seven.”
McTeague says a chronic shortage of gasoline in the American Midwest — which stretches from Ohio in the east all the way to Montana in the west and from Oklahoma in the south to the Canadian border — has contributed to the concerns of refiners in Canada.
“It’s not just the supply that is the concern; it is U.S demand is going through the roof. American economy is strong — more disposable income, lower prices and people are driving further and further in the fall season,” he said.
As far what we can expect for gas prices in the coming winter months, McTeague says they should remain stable but it all depends on how the Chicago spot market will fair.
“The demand in the U.S. is expected to stay strong, and the other thing to realize that separates gas prices in Calgary, for example, to Saskatchewan is that additional 2.33-cent-per-litre carbon pricing added at the pumps means that we will be lucky to see prices under $1 per litre this winter,” he said.

NEWS PHOTO GASBUDDY
Gas prices have been on a rollercoaster ride these past three months. Situations in the United States are to blame for the recent hikes at the pumps.

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