A strike affecting 12 U.S. oil refineries, new additives for warm-weather fuel and a weaker Canadian dollar all appear to be driving up the cost of filling up the car, according to a petroleum industry expert.
With gas hitting $1.249 in Victoria Tuesday, the second significant increase in the past two weeks, Dan McTeague, senior petroleum analyst for Gasbuddy.com, said consumers can expect to face higher prices for the next few weeks.
“It’s a perfect storm for consumers. All that could go wrong has gone wrong,” said McTeague. “But will it last? I don’t think so.”
McTeague said a United Steelworkers strike over worker safety has affected 12 plants across the U.S. That, combined with the need to reformulate gas for warmer weather — costly additives are added to the fuel to improve performance as temperatures rise — and a weak Canadian dollar used to pay for refining, is driving up the price.
He expects the price will range between $1.10 and $1.20 over the short term.
“The peculiarity of the Victoria market and a portion of southern Vancouver Island is when prices go up or down, they tend to stay there a couple of weeks,” he said.
McTeague said the most recent nine-cent jump in gas prices is a restoration of the retail margin on top of the wholesale gas-price increase.
“Having said that, the wholesale price is going to drop two or three cents per litre and that’s a positive sign,” he said.
“But it probably won’t trigger any big changes just yet.
“Maybe some of the larger stations in Victoria could drop prices, but we are not going to $1.05 per litre any time soon.”
McTeague said a return to the upper limit — about $1.50 a litre— seems unlikely at this point.
“I don’t see how the mechanics of such a rise would be possible, especially as there’s still talk that oil has further to go [down],” he said.
“Long term, it’s very difficult to make predictions, but I’m now thinking these prices can hold between $1.10 and $1.20 between now and Canada Day.”
McTeague said the latest spike in prices goes a long way to illustrate the major disconnect between oil and gasoline.
Gas prices are rising while oil remains relatively low. On Tuesday, it was $50.52 per barrel on the New York Mercantile Exchange.
“They are two very different markets. They trade differently and behave differently,” he said.
Vancouver drivers are feeling the pinch at the pump even more than their Island counterparts, as gas prices shot up above $1.30 a litre this week.
The median price for a litre of gas was $1.319 in the Vancouver region early Monday, according to GasBuddy.com.
“There is no jurisdiction in North America, when you make the conversions, that is higher,” said McTeague.
“That‘s a dubious distinction.”